Final answer:
A capital or finance lease is the type of lease that is similar to a purchase transaction and is accounted for on the balance sheet of the lessee. Such leases allow lessees to record both the asset and the lease liability, making professional guidance crucial due to the complex nature of lease agreements.
Step-by-step explanation:
The type of lease that is recorded in the accounting records similar to a purchase transaction is known as a capital lease or a finance lease. This kind of lease classifies the lessee as the effective owner of the asset, allowing the lessee to record both the leased asset and the lease liability on their balance sheet, akin to how a purchase would be recorded. The standards for what constitutes a capital lease can vary by region but typically include conditions such as transfer of ownership at the end of the lease term, a bargain purchase option, lease term that is for the majority of the asset's economic life, or present value of lease payments that amounts to most of the asset's fair value.
Leases can be complex, with terms that are often embedded in long, dense paragraphs with legal jargon, making them not only difficult to understand but also potentially stressful during issues like breaking a lease. Clear, professional guidance or legal advice can be necessary to navigate these situations effectively.