Refer to finance lease and operating lease accounting procedure:
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What are the similarities in accounting for a lease contract as a finance lease versus as an operating lease? What are the differences?
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How would they impact current financial statements? How about future financial statements?
Answer : financial lease is a lease in which risk and reward are transferred to o lessee at the time of transfer of asset
On the other hand in case of operating lease the risk and reward are not transferred et the time of transfer of asset
It's impact in financial statements are in operating lease the lease will record lease expenses on profit and loss account during the period which he uses asset
In case of financial lease report it an asset in balance sheet and corresponding liability stating the lease to be payable
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