If the answer to any one of these is yes, the lease is considered a capital lease because the lessee has in essence accepted the risks and benefits of ownership. A capital lease requires an asset, which must be subsequently depreciated, and a liability to be recorded based on the value of the asset on the date of the lease. The liability is usually paid off with a series of equal payments. A portion of each payment is interest, similar to the mortgage payments previously discussed.
If the questions are all answered no, the lease is considered an operating lease and recorded as lease or rent expense, an income statement account, every time a payment is made.