Question

Difference between operating and financial lease

Answer 1

Answer:

Financial lease offers a tax deduction for depreciation, finance charges. Operating lease offers a tax deduction for rent payments. Under a financial lease, an option of purchase of the asset is given at the end of the contractual period. Under an operating lease, no such offer is given.

Explanation:

Answer 2

Answer:

Explanation:

An operating lease is generally treated like renting. That means the lease payments are treated as operating expenses and the asset does not show on the balance sheet. A financial lease is generally treated like loan. Here, asset ownership is considered by the lessee, so the asset appears on the balance sheet