A capital lease is a lease in which the lessor only finances the lease, and all other rights of ownership transfer to the lessee, resulting in the recording of the asset as the lessee's property in its general ledger. The lessee can only record the interest portion of a capital lease payment as expense, as opposed to the amount of the entire lease payment in the case of a normal lease.
An operating lease is a lease whose term is short compared to the useful life of the asset or piece of equipment (an airliner, a ship, etc.) being leased. An operating lease is commonly used to acquire equipment on a relatively short-term basis. operating lease is therefore highly recommended
May 13th, 2015
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