What it is
Under ASC 842 a lessee records a right-of-use asset and a lease liability at commencement, then books a different monthly pattern depending on whether the lease is operating or finance. This workbook measures the opening balances from the payment terms and discount rate, builds the monthly schedule and writes the journal entries.
Pick Operating or Finance and the schedule switches: one straight-line cost for an operating lease, interest plus amortization for a finance lease. Checks prove the liability and asset reach zero and that total cost equals total payments plus direct costs and prepaid amounts less incentives.
When to use it
- At lease commencement, to measure the liability and asset and post the opening entry.
- Each month or quarter, to pull the entry for the period from the schedule.
- When an auditor asks for the lease schedule and the entry support behind the balance sheet amounts.
What’s inside
- Lease terms with classification, discount rate, direct costs, incentives and prepaid amounts
- Initial liability and right-of-use asset, calculated
- Monthly schedule for up to 120 months with interest, amortization and total lease cost
- Commencement entry and a monthly entry for any period you pick
- End-of-term and total-cost checks
Standard cited
This template follows ASC 842. It is written in our own words, except for phrases the standard requires the document to contain, with [bracketed placeholders] for client details, amounts in USD and dates as MM/DD/YYYY. Check it against the current standard and your firm’s methodology before use.
Questions
How is the initial lease liability measured?
It is the present value of the remaining fixed lease payments at the discount rate. The rate is the rate implicit in the lease when the lessee can determine it and otherwise the lessee’s incremental borrowing rate. The workbook takes the monthly payment, term, timing and annual rate and computes the present value.
What goes into the right-of-use asset?
The lease liability, plus prepaid lease payments and initial direct costs, less lease incentives received. The workbook shows each component on the Lease tab and builds the commencement entry from them.
How does an operating lease differ from a finance lease in the schedule?
An operating lease produces one straight-line lease cost, and the asset amortization is the difference between that cost and the interest on the liability. A finance lease shows interest on the liability and straight-line asset amortization as two separate expenses, so cost is higher early in the term.
What if the lease is modified later?
Use the lease modification and remeasurement worksheet. It reduces the liability and asset for a partial termination, remeasures the remaining liability and gives the entry.
Related templates
- ASC 842 Lease Schedule (Lessee)
- ASC 842 Lease Classification Test Worksheet
- ASC 842 Lease Modification and Remeasurement Worksheet
- Disclosure Checklist: Leases (ASC 842), Lessee and Lessor
Last updated 11/05/2026. All free templates.