MANAGEMENT

Detailed explanation-1: -The two most common types of leases are operating leases and financing leases (also called capital leases). In order to differentiate between the two, one must consider how fully the risks and rewards associated with ownership of the asset have been transferred to the lessee from the lessor.

Detailed explanation-2: -An operating lease is a contract that permits the use of an asset without transferring the ownership rights of said asset. A finance lease is a contract that permits the use of an asset and transfers ownership after the lease period is complete, and the lessor meets all other contract obligations.

Detailed explanation-3: -A “lease” is defined as a contract between a lessor and a lessee for the hire of a specific asset for a specific period on payment of specified rentals. ADVERTISEMENTS: The maximum period of lease according to law is for 99 years. Previously land or real resate, mines and quarries were taken on lease.

Detailed explanation-4: -True lease, unlike a finance lease, doesn’t provide room for the transfer of exclusive rights from the lessor to the lessee. This concept is otherwise known as an operating lease. An operating lease lasts less than the value of the leased property.