ratio of operating lease to capital lease within one company

ratio of operating lease to capital lease within one company

Solution

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In operating lease the lessor transfers only the right to use the property to the lessee. At the end of lease period, the lessee returns the property to the lessor.

Capital lease recognize expenses sooner as compared to operating lease.

In capital lease, the lessor records the present value of future cashflows as revenue and recognize expenses.

From a tax standpoint, the lessor can claim the tax benefits of the leased asset only if it is an operating lease.