The Lessor Is the Receiver of the Services of the Assets

question 109

True/False

The lessor is the receiver of the services of the assets under a lease whereas a lessee is the owner of the assets that are being leased.

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Definitions:

Operating Lease

An operating lease is a contract that allows for the use of an asset but does not transfer ownership rights of the asset to the lessee.

Capital Lease

A lease agreement that is classified as a purchase by the lessee for accounting purposes, as it transfers substantially all risks and rewards of ownership.

Expense Charged

An amount incurred by a business as a result of its operational activities.

Expense Recognition

The accounting principle that dictates expenses should be recorded in the period in which they are incurred, not necessarily when they are paid.