How should a long-term lease agreement be recorded in a General Fund?

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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. In effect, a long-term lease is reported as if the government had financed the acquisition of a capital asset through long-term borrowing. Remember, a debit to Expenditures-capital outlay is recorded in a governmental fund when a capital asset is purchased, and a credit is made to an Other financing source when a government receives proceeds from long-term borrowings. The amount reported is the present value of payments expected to be made during the lease, including fixed payments, certain variable payments, and other payments reasonably certain to be made.

How Should a Long-Term Lease Agreement Be Recorded in a General