A capital lease requires the lessee to record the lease as a purchase of a plant asset.

Question

Quizplus · Accepted Answer

A capital lease is treated as a purchase of a plant asset by the lessee, and therefore the lessee must record the asset on their balance sheet and depreciate the asset over its useful life. This is in contrast to an operating lease, where the lessee does not record the asset on their balance sheet and instead expenses the lease payments as rent expense.

A Capital Lease Requires the Lessee to Record the Lease