Topic-Accounting for le

ase
 Introduction
A lease is a legal agreement by which the owner of a specific asset (lessor) allows a second party (lessee) to use
the asset for a specific period in exchange for periodic payments to the lessor. These periodic payments are called
lease rentals. An operating lease is very similar to an asset rental. It lets the lessee use the leased asset for a
specific period of time, which is generally less compared to the asset’s useful life. It is mostly used to lease
equipment for short terms. A finance lease is very similar to buying an asset through external finance. It allows a
lessee to own an asset with the help of direct finance from the lessor. The lessee has the option to be the
permanent owner of the asset at the end of the lease term.Leases are contracts in which the property/asset
owner allows another party to use the property/asset in exchange for something, usually money or other
assets. lease contract is a written agreement between two parties that identifies the terms of the lease as well as
the leased property. The leased property’s owner is called the lessor and the company renting the property is
considered the lessee. A business lease for a building or equipment is not much different than a personal lease for
an apartment.
 Lessor and lesse
Lessor
The lessor is the legal owner of the asset or property, and he gives the lessee the right to use or occupy
the asset or property for a specific period. During the contract, the lessor retains the right of ownership of
the property and is entitled to receive periodic payments from the lessee based on their initial agreement.
He must also be compensated for any losses incurred during the contract due to damage or misuse of the
asset in question. If the asset is sold, the lessor must authorize such a transaction and is entitled to receive
any financial gains resulting from the sale.

Lessee
The lessee is the party who gets the right to use an asset for a specific period and makes periodic
payments to the lessor based on their initial agreement. The length of the lease period often depends
at least partially on the type of asset or property. For example, the lease of land to set up a
manufacturing plant may be for a longer period than the lease of equipment or a vehicle.
 Advantage of lesse
● Easy Source of Finance

● Convenience and Flexibility

● Shifting The Risk of Obsolence

 Limitation of lesse
● Movable
Properties

● Commercial
Properties

● Presidential
Properties
 Advantage of lessor
● Higher Profits

● Quick Returns

● Tax Benefits
 Limitation of lessor

● Increased Cost due to Loss of User Benefits

● Price-Level Changes

● Competitive Market
Misconceptions About lease
1. “Leasing won’t allow me to take ownership of the asset”

2. “I can’t finance the equipment I need”

3.“I don’t trust finance companies” –

4.“It’s too time consuming” –

Thank
You