Under an operating lease, a rent expense accrues day by day to the lessee as the property is used. This amount of rent expense is
A) capitalized in an asset account and charged against income as the asset depreciates.
B) capitalized in an asset account and netted against the corresponding lease liability each time a balance sheet is prepared.
C) charged against income in the periods benefiting from the use of the asset.
D) charged against income at the same rate as the reduction in the corresponding lease liability.

Question

Quizplus · Accepted Answer

Under an operating lease, the rent expense is recognized as an expense in the income statement in the periods that benefit from the use of the leased asset, rather than being capitalized on the balance sheet. This reflects the matching principle, where expenses are recognized in the period they help to generate revenues.

Under an Operating Lease, a Rent Expense Accrues Day by Day