> ## Documentation Index
> Fetch the complete documentation index at: https://docs.arcuserp.com/llms.txt
> Use this file to discover all available pages before exploring further.

# Lease Configuration

> Use Lease Configuration to choose direct journal entry or hybrid AP routing for ASC 842 lease payments.

<Warning>
  Lease configuration affects lease payment posting, AP visibility, check register
  history, and 1099 rent workflows. Confirm the policy with accounting before changing it.
</Warning>

## Open Lease Configuration

1. Open **Settings**.
2. Choose **Entity Settings**.
3. Open **System**.
4. Choose **Lease Configuration**.

<Frame caption={"Lease Configuration decides whether lease payments post directly or also flow through AP and the Check Register."}>
  <img src="https://mintcdn.com/arcuserp/ATYxy7SB_HGOBGqh/images/support/screenshots/settings/lease-configuration.png?fit=max&auto=format&n=ATYxy7SB_HGOBGqh&q=85&s=ca8e2b800dd03f328fd42495cc44b2e2" alt="Lease Configuration settings page showing hybrid vendor bill mode, default bank account, default AP liability account, and routing explanation" width="1920" height="1100" data-path="images/support/screenshots/settings/lease-configuration.png" />
</Frame>

## Choose A Lease Payment Mode

| Mode                    | Use it when                                                                                |
| ----------------------- | ------------------------------------------------------------------------------------------ |
| Direct journal entry    | Accounting wants the simplest lease payment posting path.                                  |
| Hybrid vendor bill mode | Lease payments should appear in AP bills, Pay Bills, Check Register, and 1099 rent review. |

Hybrid mode can create AP records during lease payment work. Direct mode keeps the
lease workflow closer to journal-entry posting.

## Review Defaults

* **Track payments through Vendor Bills**: enables hybrid AP behavior.
* **Default Bank Account**: bank account used when lease payments route through AP or payment records.
* **Default AP Liability Account**: AP account used for hybrid vendor bill routing.
* **Auto-detect**: lets Arcus use the primary or canonical account when a specific account is not chosen.

## Common Blocks

* **Lease payment did not appear in Pay Bills**: confirm hybrid mode is enabled and the lease has the needed vendor setup.
* **AP account is missing**: select a valid AP liability account manually.
* **Bank account is missing**: configure or select the bank account before payment routing.
* **1099 rent review is incomplete**: confirm lessor/vendor setup and whether payments flowed through AP.
* **Accounting wants simpler posting**: review whether direct journal entry mode is a better fit.

## Related Articles

<CardGroup cols={2}>
  <Card title="Leases" href="/support/accounting/leases">
    Manage ASC 842 leases, payments, modifications, terminations, and buyouts.
  </Card>

  <Card title="Pay Bills and Print Checks" href="/support/accounting/pay-bills">
    Pay AP bills and understand check or ACH workflows when hybrid mode is used.
  </Card>

  <Card title="1099 Vendors" href="/support/accounting/1099-vendors">
    Review flagged vendors, W-9 status, tax-year totals, downloads, and locks.
  </Card>

  <Card title="Accounting Automation Settings" href="/support/settings/accounting-automation">
    Review lease configuration alongside fixed asset and categorization settings.
  </Card>
</CardGroup>