AIOU SOLVED ASSIGNMENT 2 CODE 444 ADVANCED ACCOUNTING
DEFINATION OF LEASE:-
A legal document outlining the terms under which one party agrees to rent property from another party. A lease guarantees the lessee (the renter) use of an asset and guarantees the lessor the (the property owner) regular payments from the lessee for a specified number of months or years. Both the lessee and lessor must uphold the terms of the contract for the lease to remain valid.
KIND OF LEASE:-
On the basis of above dimensions, leases are classified into following:-
FINANCE LEASE AND OPERATING LEASE:- Finance lease, also known as full payout lease, is a type of lease where in the lessor transfers substantially all the risks and rewards related to the asset to the lessee. Generally, the ownership is transferred to the lessee at the end of the economic life of the asset. Lease term is spread over the major part of the asset life. Here lessor is only financier. Example of a finance lease is big industrial equipment.
SALE AND LEASE BACK AND DIRECT LEASE:-
In the arrangement of sale and lease back, the lessee sells his asset or equipment to the lessor (financier) with an advanced agreement of leasing back to the lessee for a fixed lease rental per period. It is exercised by the entrepreneur when he wants to free his money, invested in the equipment or asset, to utilize it at whatsoever place for any reason.
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