What would be the accounting for leases in the books of lessor and lessee?

Question

Accepted Answer

Accounting for leases involves recording lease payments and assets on the books of lessor and lessee.

Lessor records lease payments as rental income and depreciates the leased asset over its useful life.
Lessee records lease payments as lease liability and right-of-use asset on the balance sheet.
For finance leases, lessee recognizes interest expense and amortization of the right-of-use asset.
For operating leases, lessee recognizes lease expense on a straight-line basis over the lease term.
Both lessor and lessee need to disclose lease-related information in the financial statements.
Example: Lessor leasing out a building would record lease payments as rental income and depreciate the building over its useful life.
Example: Lessee leasing a vehicle would record lease payments as lease liability and right-of-use asset on the balance sheet.

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