Mike, Other/Just Looking in Yonkers, NY

what is an operating lease?

Asked by Mike, Yonkers, NY Sun Dec 5, 2010

what is the difference between operating lease and a capital lease

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Rey Hollings…, Agent, White Plains, NY
Mon Dec 6, 2010
"In an operating lease, the lessor (or owner) transfers only the right to use the property to the lessee. At the end of the lease period, the lessee returns the property to the lessor. Since the lessee does not assume the risk of ownership, the lease expense is treated as an operating expense in the income statement and the lease does not affect the balance sheet. In a capital lease, the lessee assumes some of the risks of ownership and enjoys some of the benefits. Consequently, the lease, when signed, is recognized both as an asset and as a liability (for the lease payments) on the balance sheet. The firm gets to claim depreciation each year on the asset and also deducts the interest expense component of the lease payment each year. In general, capital leases recognize expenses sooner than equivalent operating leases. " Source: Stern School of Business. My alma mater.


Rey Hollingsworth Falu
Licensed Associate Broker
Houlihan Lawrence - Bronxville

917.855.0277
Rhollingsworth@houlihanlawrence.com
Web Reference:  http://AskRey.net
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Anna M Brocco, Agent, Williston Park, NY
Mon Dec 6, 2010
Consider consulting with your tax professional and or attorney for information as it relates to your specific situation--generally an operating lease records no assets or liability and expenses are paid as incurred, such as renting an apartment, whereas a capital lease has assets and liability.
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