How Do You Spell CAPITAL LEASE?

1. A capital lease, also known as a finance lease, is a contractual agreement between a lessor, who is the owner of an asset, and a lessee, who desires to use the asset for a specified period. Under this lease arrangement, the lessee obtains the right to use the asset for the duration of the lease, making regular payments to the lessor in exchange for the use.

   This type of lease is considered a long-term arrangement, typically lasting for a significant portion of the asset's economic life. The lessee is responsible for maintaining and insuring the leased asset during the lease term.

   In a capital lease, the lessee is treated as the owner of the leased asset for accounting purposes. Therefore, both the asset and the corresponding lease liability are recognized in the lessee's financial statements. The lessee also records periodic depreciation expense for the leased asset based on its estimated useful life.

   A capital lease contains specific criteria, which include the transfer of ownership to the lessee at the end of the lease term, the presence of a bargain purchase option, the lease term encompassing a substantial portion of the asset's economic life, and the present value of lease payments exceeding a specific threshold.

   Capital leases are often used for financing significant assets such as equipment, vehicles, or real estate. They allow businesses to access and utilize these assets without incurring the full cost of purchasing them outright.

Common Misspellings for CAPITAL LEASE

The word "capital" originated from the Latin word "caput", meaning "head" or "top". In finance and economics, "capital" refers to wealth or assets that can generate income or be invested to produce more wealth.

The word "lease" traces back to the Old French word "laissier", meaning "to let go" or "to rent". It eventually evolved into the Middle English word "les", which originally referred to the act of granting possession or use of property in exchange for regular payments.

Therefore, the etymology of the term "capital lease" combines the concept of "capital" as assets or wealth and "lease" as a contract to rent or grant possession of something. In finance, a capital lease is a long-term lease agreement in which one party (the lessee) obtains the right to use and control an asset from the lessor in exchange for regular lease payments.