16.2 NATURE AND FORMS OF LEASE
A lease is a rental agreement where a series of fixed payment is made for the use of an asset over a period of time. Since it provides an alternative to outright purchase of an asset for use, leasing has become an important source of intermediate and long-term financing. In this process, a firm acquires the economic use of an asset for a specific period of time. this firm is known as the lessee. On the other hand, the asset owner is known as a lessor. The lessee pays the lessor lease rent for the use of the asset.
Broadly speaking, there are two types of leases.
- Operating lease
- Financial lease
These distinguishing features of these two types of lease are as enumerated below.
An operating lease is cancellable ...
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