In short: Business Central has no built-in MFRS 16 lease module, but you still able to record the MFRS16 transaction by using BC standard function. Use the Fixed Asset module for the right-of-use (ROU) asset, a purchase invoice for the monthly rental, and a Recurring General Journal for the monthly interest. The interest amounts come from a simple Excel table, shown below.
The scenario
Say the entity leases a Durian Peeler machine from a supplier:
- Machine value: RM10,000
- Lease term: 4 years (48 months), 1 Jan 2026 to 31 Dec 2029
- Rental paid at the end of every month
- Interest rate: 3% per year (illustrative only; in real life your Finance team sets this rate)
Monthly rental that makes the lease worth exactly RM10,000 at 3%: RM221.34.
Total rental over 4 years: 221.34 × 48 = RM10,624.32. The extra RM624.32 is the interest.
The 60-second theory
Under MFRS 16, a lease is treated like borrowing money to buy the right to use the machine:
- ROU asset (RM10,000): the right to use the machine. It is depreciated over 48 months, just like any fixed asset.
- Lease liability (RM10,000): the "loan" owed to the supplier. Every RM221.34 rental is partly interest and partly repayment.
Interest is charged on the outstanding balance, so it is highest in month 1 (RM25.00) and falls each month as the balance goes down.
Step 1: Build the schedule in Excel
Put the inputs in column B, then build the table from row 14. These are the only formulas you need:
| Cell | What it is | Excel formula | Result (month 1) |
|---|---|---|---|
| B3 | Lease liability | 10000 (input) | 10,000.00 |
| B4 | Annual rate | 3% (input) | 3.00% |
| B5 | No. of months | 48 (input) | 48 |
| B7 | Monthly rental | =ROUND(PMT(B4/12,B5,-B3),2) | 221.34 |
| C14 | Opening balance | =B3 (next rows: =G14) | 10,000.00 |
| D14 | Interest | =ROUND(C14*$B$4/12,2) | 25.00 |
| E14 | Rental paid | =$B$7 | 221.34 |
| F14 | Principal repaid | =E14-D14 | 196.34 |
| G14 | Closing balance | =C14-F14 | 9,803.66 |
Copy row 14 down for 48 months. Last month only: use Interest = Rental − Opening balance so the balance closes at exactly 0.00. This absorbs a few sen of rounding.
Real lease? Usually you know the rental from the contract, not the liability. Get the liability with
=ROUND(PV(rate/12, months, -rental),2).Show the full 48-month schedule
| Month | Date | Opening | Interest | Rental | Principal | Closing |
|---|---|---|---|---|---|---|
| 1 | 31/01/2026 | 10,000.00 | 25.00 | 221.34 | 196.34 | 9,803.66 |
| 2 | 28/02/2026 | 9,803.66 | 24.51 | 221.34 | 196.83 | 9,606.83 |
| 3 | 31/03/2026 | 9,606.83 | 24.02 | 221.34 | 197.32 | 9,409.51 |
| 4 | 30/04/2026 | 9,409.51 | 23.52 | 221.34 | 197.82 | 9,211.69 |
| 5 | 31/05/2026 | 9,211.69 | 23.03 | 221.34 | 198.31 | 9,013.38 |
| 6 | 30/06/2026 | 9,013.38 | 22.53 | 221.34 | 198.81 | 8,814.57 |
| 7 | 31/07/2026 | 8,814.57 | 22.04 | 221.34 | 199.30 | 8,615.27 |
| 8 | 31/08/2026 | 8,615.27 | 21.54 | 221.34 | 199.80 | 8,415.47 |
| 9 | 30/09/2026 | 8,415.47 | 21.04 | 221.34 | 200.30 | 8,215.17 |
| 10 | 31/10/2026 | 8,215.17 | 20.54 | 221.34 | 200.80 | 8,014.37 |
| 11 | 30/11/2026 | 8,014.37 | 20.04 | 221.34 | 201.30 | 7,813.07 |
| 12 | 31/12/2026 | 7,813.07 | 19.53 | 221.34 | 201.81 | 7,611.26 |
| 13 | 31/01/2027 | 7,611.26 | 19.03 | 221.34 | 202.31 | 7,408.95 |
| 14 | 28/02/2027 | 7,408.95 | 18.52 | 221.34 | 202.82 | 7,206.13 |
| 15 | 31/03/2027 | 7,206.13 | 18.02 | 221.34 | 203.32 | 7,002.81 |
| 16 | 30/04/2027 | 7,002.81 | 17.51 | 221.34 | 203.83 | 6,798.98 |
| 17 | 31/05/2027 | 6,798.98 | 17.00 | 221.34 | 204.34 | 6,594.64 |
| 18 | 30/06/2027 | 6,594.64 | 16.49 | 221.34 | 204.85 | 6,389.79 |
| 19 | 31/07/2027 | 6,389.79 | 15.97 | 221.34 | 205.37 | 6,184.42 |
| 20 | 31/08/2027 | 6,184.42 | 15.46 | 221.34 | 205.88 | 5,978.54 |
| 21 | 30/09/2027 | 5,978.54 | 14.95 | 221.34 | 206.39 | 5,772.15 |
| 22 | 31/10/2027 | 5,772.15 | 14.43 | 221.34 | 206.91 | 5,565.24 |
| 23 | 30/11/2027 | 5,565.24 | 13.91 | 221.34 | 207.43 | 5,357.81 |
| 24 | 31/12/2027 | 5,357.81 | 13.39 | 221.34 | 207.95 | 5,149.86 |
| 25 | 31/01/2028 | 5,149.86 | 12.87 | 221.34 | 208.47 | 4,941.39 |
| 26 | 29/02/2028 | 4,941.39 | 12.35 | 221.34 | 208.99 | 4,732.40 |
| 27 | 31/03/2028 | 4,732.40 | 11.83 | 221.34 | 209.51 | 4,522.89 |
| 28 | 30/04/2028 | 4,522.89 | 11.31 | 221.34 | 210.03 | 4,312.86 |
| 29 | 31/05/2028 | 4,312.86 | 10.78 | 221.34 | 210.56 | 4,102.30 |
| 30 | 30/06/2028 | 4,102.30 | 10.26 | 221.34 | 211.08 | 3,891.22 |
| 31 | 31/07/2028 | 3,891.22 | 9.73 | 221.34 | 211.61 | 3,679.61 |
| 32 | 31/08/2028 | 3,679.61 | 9.20 | 221.34 | 212.14 | 3,467.47 |
| 33 | 30/09/2028 | 3,467.47 | 8.67 | 221.34 | 212.67 | 3,254.80 |
| 34 | 31/10/2028 | 3,254.80 | 8.14 | 221.34 | 213.20 | 3,041.60 |
| 35 | 30/11/2028 | 3,041.60 | 7.60 | 221.34 | 213.74 | 2,827.86 |
| 36 | 31/12/2028 | 2,827.86 | 7.07 | 221.34 | 214.27 | 2,613.59 |
| 37 | 31/01/2029 | 2,613.59 | 6.53 | 221.34 | 214.81 | 2,398.78 |
| 38 | 28/02/2029 | 2,398.78 | 6.00 | 221.34 | 215.34 | 2,183.44 |
| 39 | 31/03/2029 | 2,183.44 | 5.46 | 221.34 | 215.88 | 1,967.56 |
| 40 | 30/04/2029 | 1,967.56 | 4.92 | 221.34 | 216.42 | 1,751.14 |
| 41 | 31/05/2029 | 1,751.14 | 4.38 | 221.34 | 216.96 | 1,534.18 |
| 42 | 30/06/2029 | 1,534.18 | 3.84 | 221.34 | 217.50 | 1,316.68 |
| 43 | 31/07/2029 | 1,316.68 | 3.29 | 221.34 | 218.05 | 1,098.63 |
| 44 | 31/08/2029 | 1,098.63 | 2.75 | 221.34 | 218.59 | 880.04 |
| 45 | 30/09/2029 | 880.04 | 2.20 | 221.34 | 219.14 | 660.90 |
| 46 | 31/10/2029 | 660.90 | 1.65 | 221.34 | 219.69 | 441.21 |
| 47 | 30/11/2029 | 441.21 | 1.10 | 221.34 | 220.24 | 220.97 |
| 48 | 31/12/2029 | 220.97 | 0.37 | 221.34 | 220.97 | 0.00 |
Step 2: One-time setup in BC
- G/L accounts: ROU Asset, Accum. Depreciation – ROU, Depreciation – ROU, Lease Liability, Interest on Lease Liability.
- FA Posting Group "ROU": map Acquisition Cost Account, Accum. Depreciation Account and Depreciation Expense Acc. to the ROU accounts above.
- Fixed Asset card "Durian Peeler (ROU)": FA Posting Group = ROU, Depreciation Method = Straight-line, Depreciation Starting Date = 01/01/2026, No. of Depreciation Years = 4.
Step 3: Day 1, recognise the lease
Fixed Asset G/L Journal, posting date 01/01/2026:
- Account Type = Fixed Asset, FA Posting Type = Acquisition Cost, Amount = 10,000.00
- Bal. Account Type = G/L Account, Bal. Account No. = Lease Liability
Step 4: Every month-end (3 postings)
| # | Where in BC | Debit | Credit | Jan 2026 |
|---|---|---|---|---|
| a | Purchase Invoice (supplier). Line type G/L Account | Lease Liability | Vendor | 221.34 |
| b | Recurring General Journal | Interest on Lease Liability | Lease Liability | 25.00 |
| c | Calculate Depreciation | Depreciation – ROU | Accum. Depreciation – ROU | 208.33 |
Recurring General Journal settings for (b):
- Recurring Method = V Variable: the amount clears after posting, so each month you key in that month's Interest from the schedule.
- Recurring Frequency =
1M+CM: always lands on month-end. Plain1Mdrifts from 31/01 to 28/02 to 28/03. - Expiration Date = 31/12/2029.
Quick self-check: after the month-end postings, the Lease Liability G/L balance must equal the Closing column. Jan 2026: 10,000.00 − 221.34 + 25.00 = 9,803.66 ✔
Common mistakes
- Posting the supplier invoice to Rental Expense. It must go to Lease Liability, otherwise you expense the lease twice.
- Typing the annual rate where a monthly rate is expected (or the reverse). Month 1 interest should be 10,000 × 3% ÷ 12 = 25.00, not 300.00.
- Forgetting to key in the new interest amount in the Recurring Journal. With method V the amount is blank until you enter it.
This is a simplified example for learning BC. The interest rate, low-value/short-term exemptions and year-end presentation are accounting policy decisions; confirm them with your Finance team or auditors.
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