Lessor accounting for finance lease is a type of financial transaction that involves an agreement between two parties: the lessor, who provides financing based on long-term leases, and the lessee, who receives use of specific property or equipment in exchange. This type of accounting requires the lessor to book the leased asset as an asset on the balance sheet, while recognizing all lease payments received from the lessee as revenue. The lessor must also recognize any expected future revenues, such as residual values and lease renewal fees, as well as any related expenses incurred over the life of the lease. By better understanding how this accounting works, businesses can more easily manage their financial obligations.