A capital lease is accounted for as if the asset has been purchased.

Question

Quizplus · Accepted Answer

A capital lease is structured in such a way that it transfers the risks and benefits associated with ownership from the lessor to the lessee. As a result, it is accounted for as if the lessee has purchased the asset and is using it to generate revenue. Therefore, the lessee recognizes the asset and the associated liability on their balance sheet, as well as depreciation and interest expense on their income statement.

A Capital Lease Is Accounted for as If the Asset