Accounting For Operating Lease

In The Books of Lessee

• The lease payment should be recognized as an expense in the Income Statement on a straight line basis over the lease term.

In The Books Of Lessor:

• The asset in its balance sheet is under fixed assets

• Lease income is recognize in the Income Statement on a straight line basis over the lease term

• Costs including depreciation,incurred in earning the lease income are recognized as expense

• Initial direct cost are either deferred and allocated to income over the lease term in proportion to the rental income or treated as expense in the Income Statement

• The depreciation of leased assets are like the normal way of treating depreciation of fixed assets.