Leasing is a method of financing tangible fixed assets (vehicle, equipment, etc.). It works quite simply: the lessor buys the asset from the company and then leases it back to the company.
The lease is structured so that the rent paid by the business covers the terms of the loan taken out by the lessor to finance the acquisition of the asset.
Lease rentals are recorded in the P&L statement. The asset, on the other hand, does not appear in its balance sheet since the company is a tenant and not the owner of the asset. Leasing is generally accompanied by a purchase option enabling the company to acquire the asset at the end of the lease.
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