Capital Lease

A Capital Lease is one of several types of lease arrangements that a company can hold.  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 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.