- Joined
- Jul 5, 2011
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My company is renting office space. We will not have an option to buy the property at the end of lease. The lease requires us to pay a flat rate each month in advance for rent, pay the currents months utilities, and at the end of the year pay the real estate taxes. Each item is included in the invoice from the landlord. (When we get the invoice at the end of December it will have the rent for January, a utility charge for December, and an amount for real estate taxes).
Our office manager is asking the accounts payable person to separate each item into an expense line on the general ledger, i.e. rent expense, utilities and taxes.
I said that since the utilities and taxes are being paid directly to the landlord and the amounts are included in the lease invoice, the entire amount should be expensed to rent. By doing this the A/P person only has to enter the invoice in one general ledger account and we only have to budget for one item, rent, and not three.
The office manager stated the items need to separated because if we don't we would overcharge the landlord when we send him his 1099 at the end of year. i.e. We can only include rent in the 1099-misc.
Could some one tell me the proper way to record the lease transactions?
Our office manager is asking the accounts payable person to separate each item into an expense line on the general ledger, i.e. rent expense, utilities and taxes.
I said that since the utilities and taxes are being paid directly to the landlord and the amounts are included in the lease invoice, the entire amount should be expensed to rent. By doing this the A/P person only has to enter the invoice in one general ledger account and we only have to budget for one item, rent, and not three.
The office manager stated the items need to separated because if we don't we would overcharge the landlord when we send him his 1099 at the end of year. i.e. We can only include rent in the 1099-misc.
Could some one tell me the proper way to record the lease transactions?