In this video lecture, I discuss CPA exam for Leases. On the CPA exam, students are expected to know the difference between finance lease versus operating lease.

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What Is a finance Lease?
A finance lease is a contract entitling a renter to the temporary use of an asset, and such a lease has the economic characteristics of asset ownership for accounting purposes. The finance lease requires a renter to book assets and liabilities associated with the lease if the rental contract meets specific requirements. In essence, a finance lease is considered a purchase of an asset, while an operating lease is handled as a true lease under generally accepted accounting principles (GAAP).