Lease: Lease refers to the transfer of the right to use of an asset for a specific period of time. This transfer can be for a short or long period of time. Capital Lease: A capital lease refers to an agreement in which lessee pays installments to the lessor periodically to use a particular asset. The ownership of the asset is transferred to the lessee, after the maturity of the agreement. Journalizing: It is the process of recording the transactions of an organization in a chronological order. Based on these journal entries recorded, the amounts are posted to the relevant ledger accounts. Accounting rules for journal entries: To increase balance of the account: Debit assets, expenses, losses and credit all liabilities, capital, revenue and gains. To decrease balance of the account: Credit assets, expenses, losses and debit all liabilities, capital, revenue and gains. To prepare: The journal entry of lease agreement in the books of company B.

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Chapter 15, Problem 14Q

To determine

Lease: Lease refers to the transfer of the right to use of an asset for a specific period of time. This transfer can be for a short or long period of time.

Capital Lease: A capital lease refers to an agreement in which lessee pays installments to the lessor periodically to use a particular asset. The ownership of the asset is transferred to the lessee, after the maturity of the agreement.

Journalizing: It is the process of recording the transactions of an organization in a chronological order. Based on these journal entries recorded, the amounts are posted to the relevant ledger accounts.

Accounting rules for journal entries:

To increase balance of the account: Debit assets, expenses, losses and credit all liabilities, capital, revenue and gains.

To decrease balance of the account: Credit assets, expenses, losses and debit all liabilities, capital, revenue and gains.

To prepare: The journal entry of lease agreement in the books of company B.

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