DEFINITION of 'Leasehold'

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.


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.

  1. Balance Sheet

    A financial statement that summarizes a company's assets, liabilities ...
  2. Leasehold Improvement

    Alterations made to rental premises in order to customize it ...
  3. Capitalized Lease Method

    An accounting approach that identifies a company's lease obligation ...
  4. Operating Lease

    A contract that allows for the use of an asset, but does not ...
  5. Capital Lease

    A lease considered to have the economic characteristics of asset ...
  6. Accountant

    A professional who performs accounting functions such as audits ...
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  1. How long can a building owner or landlord depreciate a leasehold improvement?

    Leasehold improvements have different depreciation rules depending on whether you are working with U.S. tax basis financial ... Read Full Answer >>
  2. What is property, plant and equipment, and what does it mean?

    Property, plant and equipment (PP&E) is a term that describes an account on the balance sheet. The PP&E account ... Read Full Answer >>
  3. Can working capital be depreciated?

    Working capital as current assets cannot be depreciated the way long-term, fixed assets are. In accounting, depreciation ... Read Full Answer >>
  4. Do working capital funds expire?

    While working capital funds do not expire, the working capital figure does change over time. This is because it is calculated ... Read Full Answer >>
  5. How much working capital does a small business need?

    The amount of working capital a small business needs to run smoothly depends largely on the type of business, its operating ... Read Full Answer >>
  6. What does high working capital say about a company's financial prospects?

    If a company has high working capital, it has more than enough liquid funds to meet its short-term obligations. Working capital, ... Read Full Answer >>

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