Accounting / July 19, 2018 / Sharon Hardin
As a refresher, a capital lease is one in which a lessee records the leased asset as if it purchased the asset using funding provided by the lessor. As a result, capital lease accounting under current GAAP is actually comprised of two transactions: A purchase of the underlying asset by the lessee AND a loan to the lessee from the lessor to fund the purchase of said asset.
Reconciling accounts and comparing transactions also helps your accountants produce reliable, accurate, and high-quality financial statements. Since your company balance sheet reflects all money spent—whether cash, credit, or loans—and all assets purchased with those funds, the accuracy of the balance sheet strongly depends on the accurate reconciliation of your company's financial accounts.
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