Why doesn't the cash outlay match the lease expense?
Per ASC 842, cash outlay and lease expenses no longer match due to the calculations requiring straight-line expenses.
Understanding Journal Entries Under ASC842
With previous lease accounting standards, it was customary for users of the financial statements to tie out the cash outlay with the lease expense line item on the P & L. Under AS 842 accounting guidance, these line items are no longer matching entries due to the calculations requiring straight-line expenses.
ASC 842 Operating Lease
A credit to the Cash/AP Clearing account now corresponds with a debit to the Lease Liability:
Debit. LT Lease Liability
Debit. ST Lease Liability
Credit. Cash/AP Clearing
The lease expense amount will now match the credit to the ROU Asset:
Debit. Operating Lease Expense
Credit. ROU Asset
Credit. LT Lease Liability
ASC 842 Finance Lease
A credit to the Cash/AP Clearing account now corresponds with a debit to the Lease Liability:
Debit. LT Lease Liability
Debit. ST Lease Liability
Credit. Cash/AP Clearing
The expense amount will now match the credit to the ROU Asset:
Debit. Amortization Expense
Credit. ROU Asset