Leasehold

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DEFINITION

An accounting term used to classify an asset on a company's balance sheet that is leased. In order to be classified as a leased asset, the firm must enter into a lease agreement that is an operating lease, and not a capital lease.

INVESTOPEDIA EXPLAINS

The reason capital leases are not included in the leasehold account is due to their accounting treatment. Capital leases are classified as long-term assets with a matching long-term liability. Examples of an operating lease, include a lease on a building, service vehicle or even heavy equipment.


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