Under governmental accounting principles for capital and operating ; expenditures are recorded each period for the amount of the annual lease payment for all , but the expenditures are classified differently for capital and operating .

Question

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Under a capital lease, the present value of the rental and other minimum lease payments or the fair value of the leased property and the related liability are recorded in the government-wide statements and proprietary funds. Governmental funds record an expenditure for the present value of the payments and proprietary funds record and capital asset and related liability when the lease is signed. Under an operating lease, the government does not record the leased asset or a liability for the rental payments. Instead, payments are recorded by the governmental funds as current expenditures.

Under Governmental Accounting Principles for Capital and Operating ; Expenditures