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Leasing - Essay Example

Finance & Accounting
Pages 2 (502 words)
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Leasing is a process by which the lessee pays the lessor certain amount of money to use home machinery, equipments and other assets for a specified period of time. At the end of the contract the leaser may be able to purchase the item with the amount of money previously paid accumulating to make the purchase price as per the lease agreement. …

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There are two main types of leases namely; financial and operating lease. A financial lease is where the company possess the asset throughout the lease period; the lessee may not sell the property during the period of a lease. On the other hand, operating lease involve a lease that is utilized if the asset has a resale value, the lessor carries out the risk associated with the lease till the end of the period. Commercial lease agreement such as real estate involves the following components: names of the tenant, this involves the first and the last names of the tenant. The lease agreement also involves terms of the lease. Lease term is the length of time/time frame when the contract between the lessee and the lessor is expected to expire, upon which the lessee may renew the agreement. Another component involves rent to be paid. The amount of rent that the tenant (lessee) should pay to the landlord (lessor) should be clearly be specified as well as the due date for payment. In addition, the responsibilities of the parties involved in a lease agreement should be clearly be defined to avoid conflict between the lessee and lessor. ...
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