The GASB identifies two types of leases for nonfinancial assets-short-term leases and long-term leases-and the accounting and financial reporting is different in governmental-type funds for the two types of leases.

Question

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Short-term leases are recorded by a debit to an expenditure account and a credit to Cash when rental payments are made. If a government enters into a long-term lease as a lessee, the government records a debit to Expenditures-capital outlay and a credit for the same amount to an Other financing source.

The GASB Identifies Two Types of Leases for Nonfinancial Assets-Short-Term