A journal entry is not required for either the lessor or lessee when an operating lease is initiated unless there is an advance payment, such as a lease bonus or prepayment of rent in addition to the periodic rents.

Question

Quizplus · Accepted Answer

When an operating lease is initiated, both the lessor and lessee are required to make journal entries to record the lease agreement, even if there are no advance payments. The lessee records lease expense over the lease term, and the lessor records rental income.

A Journal Entry Is Not Required for Either the Lessor