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(a)
The lease agreement:
Lease is an agreement where the owner of the property like building, equipment will make use of property for a specific period of time at a specific set of payments to owner. The owner of the property is known as lessor and the person who uses the property is the lessee.
Two most common types of leases are
1) Operating leases:
In an operating lease lessor retains all ownership risks and responsibilities.
2) Finance leases:
In finance lease all the ownership risks and responsibilities are transferred from the lessor to the lessee.
To prepare: The
(b)
Journal entry is same for finance lease and operating lease.
To prepare: The journal entry to record operating lease for the period as on Jan 31.
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