Distinguish between Finance lease and operating lease.

CPA-Financial-Management-Section-3 Revision kit

Finance lease                                                    Operating lease
– Long term (at least 90% of asset life).      – short-term
– Not cancelable                                                – revocable
– Operating, maintenance and insurance     – borne the owner (lessor) of costs borne lessee. asset.
– Option to buy asset at end of lease period.     – No option.

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