How to Account for an Operating Lease (Lessee's Perspective)

This video shows how the lessee would account for a lease classified as an operating lease under the new lease accounting rule. The lessee would initially recognize a right-of-use asset and a liability for the lease payments. The lessee would then recognize lease expense each period for the amount of the lease payment, with a corresponding credit for the increase in the lease liability due to interest that effectively accrues on the lease liability. To make the credits equal the debits, the right-of-use asset account is also credited as a plug.—
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