Running head: CAPITAL LEASE1Capital LeaseNameUniversity NameCAPITAL LEASE2Capital LeaseBy definition, an operating lease is termed as an agreement that allows a company to usean asset temporarily for a short term, with periodic payment by the lessee to the lessor. Thecharge for the lease is on the basis of a straight line, meaning that the lessee will give equalperiodic installments. The payment made for the purpose of the lease is termed as an operatingexpense on the part of the lessee, and it should be written off in the companys profit and lossaccount. The payment amount made over the course of the year for the purpose of the lease mustbe disclosed in the notes to the accounts.To the lessee, the capital lease would be accounted as asset as well as a liability at theinception stage of the lease. Allocation of the rental payments for the lease over a year should bemade between a reduction in a liability as well as the interest expense. For the asset part of thelease, the amortization should be in line with the normal lessees depreciation policy as regardsto the assets that the lessee owns. But in some occasions, the terms of the lease would influence ...
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