August 9th, 2011
How Do Business Owners Account For Capital Lease Transactions?
Most business owners know that there are two types of leases they can enter into when acquired equipment for their businesses. Those two types of leases are capital leases and operating leases. We will focus on the Capital Lease for the purposes of our discussion.
When the business selects a capital lease transaction then the transaction is ‘capitalized’ on the company financial statements. There are two parts to this capitalization process – first the asset is recorded on the balance sheet as a fixed asset, and at the same time the firm records a liability for the lease on the Liability section of the balance sheet.


