Under the operating lease, the asset remains in the balance sheet of lessor. The lessor recognises rental income and depriciation expense. So, with time the value of asset decreases. So, how does the equation A=L+E balance out? Can someone please explain. Thanks!
The lessor gets rental income; that increases assets (cash) and equity (income).
The lessor depreciates the asset; that decreases assets (accumulated depreciation) and equity (income).