- milestone two.docx - Management Brief Payton Approved ACC309 Milestone Two Lisa Florey A capital lease by definition is \u201cA contract entitling a

- milestone two.docx - Management Brief Payton Approved...

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Management Brief Payton Approved ACC309 - Milestone Two Lisa Florey A capital lease by definition is “A contract entitling a renter to the temporary use of an asset, and such a lease has the economic characteristics of asset ownership for accounting purposes. The capital lease requires a renter to book assets and liabilities associated with the lease if the rental contract meets specific requirements. In essence, a capitol is considered a purchase of an asset, while an operating lease is handled as a true lease under General Accepted Accounting Principles (GAAP). In other words a capital lease is a lease in which the lessor only finances the leased asset, and all other rights of ownership transfer to the lease. The results in the recordation of the asset as he lessee’s property in its general ledger fixed assets. The lessee can only record the interest portion of a capital lease payment as an expense, as opposed to the amount of the entire lease payment in the case of the more common operating expense.” (Criteria
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