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A Capital Lease is one of several types of lease arrangements that a company can enter into. A capital lease allows the lessee to use the lease arrangement as a source of financing. This is because a capital lease allows the company to make monthly lease payments - which are actually installment payments. These rental payments under a capital lease structure actually constitute a payment of principal plus interest on a loan.
Capital lease obligations of a company can be found in the liabilities section of the balance sheet. The property leased under this arrangement can be found in the assets section of the balance sheet. |
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