- A capital lease is a contract that gives the lessee the right to temporarily use an asset.
- A capital lease is treated as a purchase of an asset and an operating lease is treated as a real lease under generally accepted accounting principles (GAAP).
- In a capital lease, the leased asset is treated for accounting purposes as if it were actually owned by the lessee and is shown in the balance sheet as such.
- An operating lease does not confer any ownership of the leased asset and is treated differently from an accounting point of view.