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Capital lease
Fixed-term (and usually non-cancelable) lease that is similar to a loan agreement for purchase of a capital asset on installments. The lessor's services are limited to financing the asset, the lessee pays all other costs including insurance, maintenance, and taxes. Capital leases are regarded as essentially-equivalent to a sale by the lessor, and a purchase by the lessee (even though the title remains with the lessor). Therefore, leased assets must be capitalised and shown in the lessee's balance sheet as a fixed asset with a corresponding non-current liability (lease payable).
- Part of Speech: noun
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- Industry/Domain: Accounting
- Category: General accounting
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