Equipment rental expense definition
/What is Equipment Rental Expense?
Equipment rental expense is an account in which is stored the year-to-date expense associated with renting various types of equipment. For example, it might incur a rental expense for a copier, an automobile, or production equipment. The balance in the account is cleared out at the end of each fiscal year.
Example of Equipment Rental Expense
As an example of equipment rental expense, a construction company rents a bulldozer for a large project. The rental cost is $500 per day, and the company uses the equipment for 10 days. The total equipment rental expense recorded for the project would be:
$500/day × 10 days = $5,000
This expense would be categorized under operating expenses or project-specific costs, depending on the company's accounting practices.
Presentation of Equipment Rental Expense
The ending balance for the equipment rental expense account may appear as a separate line item in the income statement, or it may be aggregated with other accounts into a line item with a different designation. If the rental expense pertains to the production process, then it should be classified within the cost of goods sold. Or, if the rental expense pertains to administration, then it should be classified within the selling, general and administrative section of the income statement.