Who is the lessor?

Who is the lessor?

• A. The entity that uses the asset
• B. The entity that provides the right of use asset
• C. The broker arranging the lease
• D. The lessee's financial lender

Answer: (B)

In a lease, two main parties sit at the center: the lessee, who uses the asset, and the lessor, who owns the asset and provides its use to the lessee in exchange for payments. The lessor is therefore the entity that provides the right of use asset. For example, a car-leasing company leases a car to a business; the leasing company is the lessor because it owns the car and grants that use to the lessee. The other options describe the user, a broker, or a lender, none of which define the lessor. In accounting terms, the lessee recognizes a right-of-use asset, while the lessor retains ownership and records appropriate lease-theory effects depending on the lease type.

In a lease, two main parties sit at the center: the lessee, who uses the asset, and the lessor, who owns the asset and provides its use to the lessee in exchange for payments. The lessor is therefore the entity that provides the right of use asset. For example, a car-leasing company leases a car to a business; the leasing company is the lessor because it owns the car and grants that use to the lessee. The other options describe the user, a broker, or a lender, none of which define the lessor. In accounting terms, the lessee recognizes a right-of-use asset, while the lessor retains ownership and records appropriate lease-theory effects depending on the lease type.