Business Terms and Jargon Explained

What is Off Balance Sheet

If an asset is rented or is on a lease agreement where you do not become the owner. This Asset and its cost is not show on the balance sheet (off balance sheet) but is charged to the profit and loss account. This has a tax implication where the cost reduces the profit and therefore reduces your tax for that period.

If you rent fleet of cars worth 100,000 at 15,000 a year then this 15,000 is a cost and charged to the profit and loss account for that year. There is no mention of the fleet in the balance sheet. If you purchased the fleet of cars then they will be shown in the balance sheet at cost and depreciation is charged to the profit and loss account.

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Term created / updated 2006-04-24 11:55:35

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