The Major Accounting Difference Between a Finance Lease and an Operating

question 73

Multiple Choice

The major accounting difference between a finance lease and an operating lease is that finance leases:

• A) involve larger amounts of funds.
• B) are for longer periods of time.
• C) involve the recognition of assets and liabilities.
• D) are cancellable.

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Definitions:

Footing

Footing is the process of summing up the numerical values in an accounting column to determine the total, typically as a preliminary step in the preparation of financial statements.

Normal Debit Balance

The expected balance type of an account that is increased by a debit, typical for assets, expenses, and losses.

Withdrawals

Money taken out from a bank account, or the act of taking out funds from a business by its owners for personal use.

Expenses

Outflows or other uses of assets or incurrences of liabilities during a period from delivering or producing goods, rendering services, or carrying out other activities that constitute the entity's ongoing major operations.