In a leasehold improvement, the lessee debits the costs toMultiple choice question.LeaseholdsLease LiabilityLease AmortizationLeasehold Improvements

Analyzing the Multiple Choice Question

1. Understanding the Question: The question pertains to accounting practices related to leasehold improvements made by a lessee. Specifically, it asks which account the lessee should debit when incurring costs for leasehold improvements.

2. Relevant Concepts:

   • Leasehold Improvements: Refers to improvements made to a leased property, which typically revert to the lessor at the end of the lease term.
   • Accounting Treatment: According to accounting standards, leasehold improvements are recorded as an asset on the balance sheet since they provide future economic benefits.

3. Options Analysis:

   • Leaseholds: This option generally refers to the contractual agreement of leasing property but does not specifically denote an accounting entry.
   • Lease Liability: This refers to the obligation to make lease payments. It's not the account affected by improvements.
   • Lease Amortization: This pertains to the amortization of the lease liability and does not capture the cost associated with improvements.
   • Leasehold Improvements: This is the correct account to debit when costs are incurred for improvements made to leased property.

Final Answer

The correct answer is Leasehold Improvements.