Rental/Occupancy/Lease costs Allowable with Restrictions
Cost of renting or leasing real or personal property can be classified under two major categories: Capital Leases or Operating Leases. Auditors are concerned with the proper classification of a lease as either capital or operation. Most small businesses rent/lease their space under an Operating Lease. You know the month-to-month lease you pay for renting space, equipment, or any other real or personal property. Capital Leases are generally involved with a purchase option or transfer of ownership by lease end. I briefly discuss capital as well as related party leases later on in this article,
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