Executive summary

Small and mid-market companies using QuickBooks Online face a practical gap when ASC-840 capital leases must appear on the balance sheet. QuickBooks Online does not have a dedicated lease accounting module that calculates present value, creates a right-of-use (ROU) asset, posts the corresponding lease liability, and automates amortization or interest allocation. Intuit’s own guidance advises accountants to use manual journal entries, treating lease payments as expense or liability depending on classification.

A pragmatic workflow is to capture contract details, prepare an external present value and amortization schedule, create the ROU asset and lease liability accounts in QuickBooks Online, post an opening journal entry, and then record periodic amortization and interest split entries. This can be done using QuickBooks Online Advanced fixed asset features, spreadsheets, or third-party tools such as Finboard.ai.

This guide provides worksheet fields, QuickBooks Online actions, sample journal entries, reconciliation steps, and control points to make the process auditable and repeatable.

When to capitalise: ASC-840 tests and decision checks

ASC-840 requires a lease to be capitalised if any of the following four tests are met:

• Transfer of ownership

• Bargain purchase option

• Lease term ≥ 75% of asset life

• Present value of payments ≥ 90% of asset fair value

If none of the tests are met, the lease is treated as an operating lease under ASC-840.

More about “Operating lease accounting in QuickBooks Online” - 

Practical workflow in QuickBooks Online:

• Capture contract metadata in a lease register: lessor name, commencement date, lease term, payment amounts/timing, residuals, options, incentives, initial direct costs.

• Run the four tests and save evidence in an attachments folder.

• Note the conclusion and the primary reason for capitalisation in both the spreadsheet and QuickBooks Online journal memo.

ASC-840 Test Evidence Table:

Auditors expect clear evidence that the capitalisation decision was made at inception and retained in the records.

Step-by-step: Compute PV, create accounts, and post opening JE

Minimum data required: payment schedule, payment dates, discount rate (policy or incremental borrowing rate), initial direct costs, commencement date, residual values, and useful life estimate.

Compute Present Value (PV):

• Build an amortization spreadsheet.

• Apply the appropriate discount rate under ASC-840.

• Multiply each lease payment by its discount factor and sum.

• Use Excel NPV or an external calculator.

Template to calculate the lease liability schedule and Amortization schedule can be accessed in https://finboard.ai/templates/finance-lease-calculator.

Chart of Accounts setup in QuickBooks Online:

• Right-of-Use Asset — Non-current Asset

• Accumulated Amortization — Contra Asset (optional)

• Lease Liability — Current Portion (Other Current Liabilities)

• Lease Liability — Non-Current Portion (Long-Term Liabilities)

Example Opening Journal Entry (PV = $100,000; IDC = $2,000):

Date: Lease commencement  

Dr. Right-of-Use Asset       $102,000  

     Cr. Lease Liability (Non-current)   $100,000  

     Cr. Cash/Bank (IDC paid)              $2,000  

Attach the PV worksheet and lease contract to the journal entry or store externally with a reference in the memo.

Periodic entries

Monthly payment JE (cash $2,000; interest $150; principal $1,850):

Dr. Interest Expense             $150  

Dr. Lease Liability (current)  $1,850  

     Cr. Bank/Cash               $2,000  

Monthly amortization JE ($850):

Dr. Amortization Expense        $850  

     Cr. Accumulated Amortization   $850  

Reconcile the lease liability schedule to QuickBooks Online monthly. Keep the amortization schedule as the source of truth.

(Where $850 is ROU amortization per month.)

Reconciliation: Reconcile lease liability subsidiary schedule to QuickBooks Online balance each month. Keep the amortization schedule as the source of truth and save reconciliations. Intuit Advanced fixed asset features or apps can automate depreciation but many users rely on spreadsheets or third-party tools  like finboard.ai. 

Audit trail, supporting documentation, and disclosure schedule

Minimum workpapers to keep:

• Signed lease contract (PDF).

• PV calculation workbook with inputs and discount rate policy.

• Lease classification memo (which ASC-840 test triggered capitalisation). 

• Opening JE with attachments or cross-reference to the document store.

• Periodic amortization schedule and monthly reconciliations.

Disclosure schedule (footnote ready): Lease maturities by year, interest rate used, weighted average remaining lease term, total future minimum lease payments (ASC-840 style), and details of capitalised leases. QuickBooks Online reporting is transactional; build a disclosure table from exported amortization schedules. 

Attachment best practice: Save attachments with consistent file naming, and include the file reference or URL in QuickBooks Online JE memo. Intuit allows attachments but version control and cross-linking should be managed externally. 

Tools, apps and automation (QuickBooks Online Advanced vs third-party apps like Finboard.ai )

Options and evidence

• QuickBooks Online Advanced Fixed Assets: Improved fixed asset support can automate depreciation but still requires manual PV input and JE creation for leases. 

• Finboard.ai: Automates depreciation and lease entries, connects to QuickBooks Online via googlesheet. Use for high volume or when automation is required. 

• Manual spreadsheet (or Google sheet) + recurring JEs: Lowest cost, higher control, higher risk of error.

Tool comparison table (fields)

Recommendation: For one or two leases, spreadsheet + manual JEs is acceptable with strong controls. For multiple leases, or where audit readiness is critical, use a specialised tool like Finboard.ai that can post to QuickBooks Online and maintain attachment links. 

Risks & mitigations

Top risks

1. PV calculation errors — Mitigation: use standard PV formulas, document discount rate, have independent review.

2. Incorrect interest/principal split — Mitigation: use amortization schedule and automated templates; reconcile monthly. 

3. Weak audit trail — Mitigation: attach contracts, PV worksheet, and approvals to JE; maintain a lease register.

4. Disclosure omissions — Mitigation: produce footnote templates from amortization exports.

5. App mapping errors — Mitigation: test mappings in sandbox before going live; reconcile after first month. 

Edge cases to watch: variable payments, embedded leases, modifications, short-term lease election, FX remeasurement. These require bespoke calculations and judgment. 

Tool / Workflow Comparison (table)

Mini-Case (QuickBooks-centric)

Scenario: A small mid-market services company signs a 5-year equipment lease, monthly payments $2,000 starting Jan 1, 2025. The PV at a discount rate of 6% is $108,000. Initial direct costs $2,000.

Actions taken: Company creates ROU asset $110,000 and lease liability $108,000 (difference is IDC paid in cash). Opening JE posted with attached contract and PV worksheet. Spreadsheet amortization created with Finboard.ai ; monthly amortization JE scheduled as recurring entry. Lease liability reconciled monthly.

Outcome: Auditors requested the PV worksheet and confirmation of discount rate policy. The company provided a policy memo and reconciliations which passed review. With  Finboard.ai  they have reduced the  manual effort. 

FAQ (Q&A)

Q1: Can QuickBooks Online compute the PV of lease payments automatically?
A1: No. QuickBooks Online does not include a lease PV calculator. Compute PV externally (with templates of Finboard.ai ) and post results as a journal entry. 

Q2: Should amortization hit depreciation or expense?
A2: Under ASC-840 capital leases are capitalised and amortised. Use amortization (depreciation) expense for ROU assets and interest expense for finance charges. Document the basis. 

Q3: Is QuickBooks Online Advanced sufficient for lease accounting?
A3: QuickBooks Online Advanced improves fixed asset tracking but does not fully automate lease PV and remeasurement. Third-party tools like Finboard.ai apps remain the practical solution for scale. 

Q4: How do I keep an auditable trail?
A4: Attach contracts and PV worksheets to JE, keep lease register with versioning, and store reconciliations. Use consistent naming conventions. 

Q5: What about short-term leases under 12 months?
A5: If the company elects the short-term exemption, treat payments as expense. Document elections and apply consistently. 

Glossary (one line each)

• ROU asset (Right-of-Use asset): The capitalised asset representing the lessee’s right to use the leased item. 

• Lease liability: Present value of remaining lease payments recognised on the balance sheet. 

• PV (Present Value): Discounted value of future lease payments at the chosen discount rate.

• Initial direct costs (IDC): Incremental costs of obtaining the lease, capitalised and amortised.

• Amortization (ROU): Periodic reduction of the ROU asset balance to expense.

• ASC-840: US GAAP standard previously used for leases (capital vs operating tests); still relevant for legacy accounting.