How are leases recorded in accounting?

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Leases are recorded in accounting by determining if they are operating or finance leases, then recognizing lease liabilities and assets on the balance sheet.

Leases are classified as either operating leases or finance leases based on specific criteria outlined in accounting standards.
Operating leases are expensed on the income statement over the lease term, while finance leases result in the recognition of lease liabilities and assets on the balance sheet.
Lease liabilities represent the future lease payments owed by the lessee, while lease assets represent the right to use the leased asset.
The initial recognition of a lease liability and asset is based on the present value of future lease payments.
Subsequent accounting involves amortizing the lease liability, recognizing interest expense, and depreciating the lease asset.
Disclosure requirements for leases include providing information about lease commitments and the nature of lease arrangements in the financial statements.

How are leases recorded in accounting?

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