Accounting / July 19, 2018 / Holly Mercer
In effect the capital lease accounting treatment deals with asset as it it had been purchased using a loan as finance. The asset is depreciated as normal over the term of the agreement, and the rental payments are split between principal and interest to clear the loan balance over the term, and to charge the profit and loss account with the interest.
A commercial lease agreement is a contract to rent retail, office, or industrial space between a landlord and tenant. The tenant pays a monthly amount to the landlord in return for being allowed the right to use the premises for their business purpose. Commercial leases are generally longer than residential types, between 3-5 years, and is common for the tenant to have options to renew at pre-determined monthly rates.
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