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. Operating Lease

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

    A lease considered to have the economic characteristics of asset ...
  4. Leasehold Improvement

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

    An accounting approach that identifies a company's lease obligation ...
  6. Encumbrance

    A claim against a property by a party that is not the owner. ...
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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. Does working capital include salaries?

    A company accrues unpaid salaries on its balance sheet as part of accounts payable, which is a current liability account, ... Read Full Answer >>
  4. What is a profit and loss (P&L) statement and why do companies publish them?

    A profit and loss (P&L) statement, or balance sheet, is essentially a snapshot of a company's financial activity for ... Read Full Answer >>
  5. How do dividends affect the balance sheet?

    Dividends paid in cash affect a company's balance sheet by decreasing the company's cash account on the asset side and decreasing ... Read Full Answer >>
  6. Are dividends considered an expense?

    Cash or stock dividends distributed to shareholders are not considered an expense on a company's income statement. Stock ... Read Full Answer >>

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