What is a Leasehold?

A leasehold is an accounting category that contains leased assets.

How Does a Leasehold Work?

For example, let's say that Company XYZ leases a widget-making machine from Company ABC. It pays $2,000 a month to lease the asset. It also pays $1,000 a month to lease two delivery vehicles, $3,500 a month for office space, and $400 a month for a couple of billboards around town. These are Company XYZ's leaseholds.

Leaseholds can also be for cars, manufacturing equipment, office space, photocopiers, musical instruments, solar panels, or virtually any other asset. Generally, leases are handy when one party has the capital to purchase the asset and another party does not have the capital to do so but would like access to the asset.

Why Does a Leasehold Matter?

Leaseholds designate which assets aren't really the lessee's property. Accordingly, these are assets that companies must account for them in particular ways.

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Paul Tracy
Paul Tracy

Paul has been a respected figure in the financial markets for more than two decades. Prior to starting InvestingAnswers, Paul founded and managed one of the most influential investment research firms in America, with more than 3 million monthly readers.

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