What is the meaning of operating lease and finance lease in the accounting course, and how should it

To put it simply, operating lease means that you rent equipment, use it for a short time, and you still have to return the lease when you don't use it in the future, and the rented equipment is not included in fixed assets and depreciation is not accrued.

Financial leasing is to lease this equipment, a lease for a few years, the time is almost half of the service life of the equipment, and do not pay it back later, the lease period of the equipment will be directly left in the enterprise, directly included in the fixed assets. In terms of accounting treatment, it is directly comparable to the treatment of fixed assets.

Operating leases, also known as business leases, are symmetrical financial leases. It is an asset lease that occurs to meet the temporary or seasonal needs of business use. Operating lease is a form of short-term lease, which refers to a form of lease in which the lessor not only provides the lessee with the right to use the equipment, but also provides the lessee with maintenance, insurance, repair and other specialized technical services of the equipment (financial lease does not need to improve this service).

Financial leasing, also known as equipment leasing or modern leasing, refers to a lease that substantially transfers all or most of the risks and rewards associated with the ownership of an asset. The ownership of an asset can eventually be transferred or not.

Operating lease, simply put, is to rent other people's things to do their own work, and only pay rent, and nothing else.

Financial leasing is the same as installment payment, when the rent you pay is enough to buy the equipment, the equipment is yours, and the same accounting treatment is done with your own assets in use.

Operating leases are leased equipment that is not included in fixed assets and does not accrue depreciation, but is only leased and paid on a monthly basis.

Financial leasing is basically equivalent to the purchase of the fixed assets in installments, and the equipment will be directly left in the enterprise when the lease period expires, and will be directly included in the fixed assets. In addition, depreciation should be accrued during the lease period, and the accounting treatment is directly compared with the treatment of fixed assets.

The main differences between a finance lease and an operating lease are:

1) The subject matter of the lease is different:

The subject matter of financial leasing: strong specificity, generally special equipment.

The subject matter of the operating lease: generally general equipment.

2) The treatment of the subject matter is different during the lease period:

Financial lease: The lessee shall be deemed to be responsible for the management of its own fixed assets and shall be responsible for depreciation and maintenance, and shall not unilaterally terminate the lease contract.

Operating lease: The lessor provides technical services and is responsible for maintenance, and the lessee can terminate the lease contract at any time according to the actual situation.

3) The length of the lease is different.

Financial leasing: generally more than 75 or close to the life cycle of the equipment.

Operating lease: The lease period is short, and the leased property can be repeatedly leased to different leases.

Extended information: The enterprise leases a fixed asset by way of financial lease, because during the lease period, the lessee substantially obtains the main economic benefits provided by the asset, and at the same time bears the risks related to the asset. Therefore, the lessee should record the financial leased assets as a fixed asset, recognize the corresponding liabilities, and provide for the depreciation of the fixed assets.

Different from operating leases, operating leased assets are not included in fixed assets, and there is no control and ownership of leased assets, while financial leases have actual control over assets.

Financial leasing should be understood as follows: the enterprise wants to purchase a piece of equipment, but the funds are insufficient, so it and the financing company jointly purchase the equipment, and the financing company advances the payment for the equipment, and the enterprise pays a part of the contract first, and the rest of the money is made up by rent.

Specific characteristics of financial leases:

The characteristics of financial leasing are generally summarized into five aspects.

1. The leased property shall be decided by the lessee, and the lessor shall purchase and lease it to the lessee at its own expense, and shall only be leased to one enterprise during the lease period.

2. The lessee is responsible for inspecting and accepting the leased property provided by the manufacturer, and the lessor does not guarantee the quality and technical condition of the leased object.

3. The lessor retains the ownership of the leased property, and the lessee has the right to use the leased property by paying rent during the lease period, and is responsible for the management, repair and maintenance of the leased property during the lease period.

4. Once the lease contract is signed, neither party has the right to unilaterally revoke the contract during the lease period. The execution of the contract can only be suspended if the leased property is destroyed or proved to have lost its use value, and the penalty for unjustified repudiation is substantial.

5. After the end of the lease period, the lessee generally has two options for the leased property to retain and return the lease, and if you want to keep the purchase, the purchase can be determined by the lease and the two parties through negotiation.

Features of Operating Leases:

1) Revocable. During the contract period, the lessee may terminate the contract and return the equipment in order to lease more advanced equipment;

2) Insufficient payment. During the basic lease period, the lessor can only recover part of the advance capital of the equipment from the lease, and needs to lease the equipment to multiple lessees for use multiple times in the future to make up for the unrecovered part of the equipment investment plus the profit it should receive;

3) The leasing agency not only provides financing facilities, but also provides maintenance management and other specialized services, is responsible for the applicability and technical performance of the leased equipment, and bears the risk of obsolescence and is responsible for purchasing insurance.

In terms of accounting treatment, there are some differences between financial leases and operating leases.

A financial lease is a type of financial lease, which is a financing instrument designed to provide capital to lessees to help them obtain the assets they need without having to take on the risk of purchasing the entire asset. The accounting treatment of financial lease is that when the lessee signs the lease contract, the lease money is included in the liabilities and the leased assets are included in the balance sheet. When the lease contract expires, the lessee can choose to continue the lease or choose to purchase the leased asset.

An operating lease is a type of commercial lease, which is an economic contract that provides the lessor with assets to help them meet the resources they need to operate. The accounting treatment of operating leases is that when the lease contract is signed, the lessor includes the lease money in income and the leased assets in the balance sheet. When the lease contract expires, the lessee can choose to continue the lease or transfer the leased assets.

Financial leasing refers to the fact that an enterprise borrows funds from a financial institution and leases assets to users in the form of leasing, and the ownership of assets still belongs to the financial institution. An operating lease means that an enterprise leases the assets it owns to the user, and the ownership of the assets still belongs to the enterprise.

The rental income of financial leasing shall be included in the non-operating income and shall not be included in the calculation of the income from the operating activities of the enterprise. The rental income from operating leases shall be included in the operating income and included in the calculation of income from business activities.

The assets of a financial lease cannot be included in the balance sheet of an enterprise, while the assets of an operating lease should be included in the balance sheet of an enterprise.

The debts of financial leases should be included in the balance sheet of the enterprise, while the debts of operating leases should not be included in the balance sheet of the enterprise.

What are the accounting subjects set up by the lessor when accounting for the financial leasing business?

Hello, I am glad to answer for you that "financial lease receivables", "financial lease fixed assets", "deferred income - unrecognized financing income" and other accounts should be set up, which belong to assets, assets, and owners' equity. In the Accounting Standards for Business Enterprises - Financial Leasing Standards, the lessor should set up accounts such as "financial lease receivables", "financial lease fixed assets holding loss-making assets", and "deferred income - unrecognized financing income".

Hope it helps.

First, the financing lease period is very long, and it can almost be used to scrap the leased things;

Second, the value of financial leases is generally larger, and the value of operating leases can be large or smaller.

Third, the essence of financial leasing is a financing nature, for example, the company does not have much capital, and cannot pay off the purchase price at one time, so it pays in the name of installment rent (the rent includes installment interest, a bit like buying something in installments with a credit card, and the total amount of general installment payment is larger than the one-time payment), and the money is paid off, and the thing is almost yours; Operating rent is to use other people's things in the real sense and pay rent to others;

Fourth, in accounting, the subject matter of the financing lease is treated as the goods of its own company, and depreciation can be extracted; The business leased things are still regarded as other people's things, and depreciation cannot be mentioned.

For operating leases, the lessee only has the right to use and pays rent regularly, which is not accounted for as fixed assets and depreciation is not provided; In a financial lease, the lessee obtains substantial ownership, which is accounted for as a fixed asset and depreciated.

1. Financial lease can be understood in this way: the purpose of the lease is to own the fixed asset, but this installment payment method is adopted because the value is too high. Therefore, in terms of accounting, even though the enterprise has not yet obtained its ownership, it is still listed as an enterprise asset for accounting and management.

The lease fee paid is included in the value of the fixed asset.

2. As for the operating lease of fixed assets, the purpose of the lease is only to meet the needs of temporary production and operation, so it is not an asset of the enterprise, and the enterprise does not carry out accounting and management, but only pays rent.

The lease fee paid is included in manufacturing expenses, administrative expenses, etc., depending on the purpose.

An operating tenant simply rents someone else's property and pays a regular lease fee, just as we rent someone else's house and only pay rent. The upkeep and maintenance of the assets belong to the lessor, because they are the owners of the assets.

However, the financial lessor is unable to pay the cost of the asset in a lump sum for various reasons. Therefore, a financing request is made to the lessor, and the asset is used first, and the price of the asset is paid in installments during the agreed lease period. For the lessor, he is equivalent to providing a loan to the lessee, but the loan is in the form of assets, and the rent collected on each day of rent collection consists of two parts:

The principal of the asset and the interest required by the lessor to advance the principal of the asset. Financial leasing is essentially a financing act. When making accounts, it is equivalent to our own fixed assets, and depreciation should be accrued, as if we buy a house with a bank mortgage loan, we are the lessee, the bank is the lessor, and the house is the leased asset.

Differences: 1. Different functions: because the leasing company can provide ready-made financial leasing assets, so that the enterprise can obtain and install it in a very short time with a small amount of funds, and can quickly play a role and produce benefits, therefore, the financial leasing behavior can enable the enterprise to shorten the construction period of the project, effectively avoid market risks, and at the same time, avoid the enterprise from letting go of fleeting market opportunities due to insufficient funds.

Operating leases enable enterprises to selectively lease assets that they urgently need but do not want to own. In particular, equipment with high process level and fast upgrading is more suitable for operating leasing.

2. The two judgment methods are different: the essence of financial leasing is to transfer all the risks and rewards related to asset ownership, in a sense, for the lessee enterprise that determines the right of first refusal, financial leasing is essentially an alternative way to purchase fixed assets by installments, but it is much higher than direct purchase.

However, the operating lease is different, only the right to use the asset is transferred, but the risks and rewards related to the ownership of the asset are not transferred, and it still belongs to the lessor, and the lessee only pays the relevant expenses in accordance with the contract, and the operating lease assets that expire are returned to the lessor by the lessee enterprise.

The main differences between the accounting treatment of financial lease and operating lease are: operating lease is a lease other than financial lease, and financial lease is a lease that substantially transfers all the risks and rewards related to the ownership of the leased assets.

1.Operating lease: In order to solve the seasonal and temporary needs of production and operation, the enterprise does not have long-term ownership, and the lease term is short, and the right to use the assets during the lease period is until the lease expires.

The lessee does not need to record the valuation of the leased fixed assets, nor does it need to accrue depreciation, but only needs to register them in the reference account.

2.Financial leasing: Although the ownership of the assets still belongs to the lessor during the lease period, the lessee essentially obtains the main economic benefits provided by the leased assets and bears the risks related to the assets because the asset lease period basically includes the effective service life of the assets.

3.Accounting differences:

1) Operating lease machinery and equipment - sets, rent paid by bank deposit. Its accounting treatment:

Borrow: manufacturing costs.

Credit: Bank deposits.

2) Financial leasing of fixed assets leased by financial lease, generally need to be accounted for under the "fixed assets" account, and set up a detailed account of "financial leased fixed assets".

a.On the lease start date, the "fixed asset" is debited at the amount that should be included in the cost of the fixed asset (whichever is lower between the fair value of the leased asset and the present value of the minimum lease payment at the lease start date, plus the initial direct expenses)."or "construction in progress", "long-term payables - financial lease payables" are credited, and "unrecognized financing expenses" are debited according to the difference.

b: At the expiration of the lease term, if the contract stipulates that the ownership of the equipment will be transferred to the lessee enterprise, the fixed assets shall be transferred from the detailed account of "financial lease to fixed assets" to the detailed account of the relevant fixed assets.

c: The unrecognized financing expenses shall be apportioned in accordance with the method of each period during the lease period, and the "financial expenses" shall be debited and the "unrecognized financing expenses" shall be credited when apportioned.