Meaning & use
capital lease
Last updated
Meanings
nouncountablebusinessfinanceAmerican
A long-term rental agreement for an asset that the renter must record as if it owned the asset, because the deal is effectively a purchase.
Grammar: Countable: use a/an and a plural form — a capital lease, several capital leases.
Patterns
- sign a capital lease
- a capital lease for something
- treat something as a capital lease
The airline signed a capital lease for three new planes.
Under the old rules, a lease lasting most of the asset's useful life counted as a capital lease.
Her job is to decide whether each contract is a capital lease or an operating lease.
noununcountablebusinessfinancetechnical
The accounting method in which such an agreement is entered on the balance sheet as both an asset and a debt.
Grammar: Used without an article when it names the method rather than one contract: the company uses capital lease accounting.
Patterns
- capital lease accounting
- put something under capital lease
The auditor asked them to move the equipment into capital lease accounting.
Capital lease treatment raised the company's reported debt.
Word forms
| plural | capital leases |
|---|
Common combinations
- operating lease
- Unlike a capital lease, an operating lease stays off the balance sheet.
- sign a capital lease
- They signed a capital lease to fund the new warehouse.
- capital lease obligation
- The capital lease obligation appears as a long-term liability.
- qualify as a capital lease
- The contract qualifies as a capital lease under the four tests.
- capital lease vs operating lease
- The seminar explained capital lease vs operating lease in simple terms.
Synonyms and how they differ
- finance lease
- The usual British term for much the same arrangement; use it in UK accounting writing.
- hire purchase
- A British retail arrangement where the buyer eventually owns the goods; it is a type of purchase, not an accounting category.
Opposites
Word family
Commonly confused: capital lease or finance lease? capital lease or operating lease?
capital lease vs finance lease
In British English this is the standard label for the same idea; American writers call it a capital lease.
capital lease vs operating lease
A short-term rental that is not recorded as an asset; it is the opposite category.
Practice
Which sentence uses 'capital lease' correctly?
Choose one answer.
'Take out a capital lease on something' is the natural pattern. Option 2 wrongly uses the noun as a verb, and options 3 and 4 break the preposition and verb patterns.
Make it your own
Write a sentence using “capital lease”, then check it and compare it with the examples above.