Operating leases are considered to be rental agreements. The individual who rents the asset is referred to as the "lessee". The "lessee" pay's periodic rent payments. They are expensed over the life of the lease. The "lessee" just uses the asset and returns it once the contract is up.
Accounting procedures for an operating lease are simple; compared to the accounting for capital leases.
Rent Expense
Cash/Rent Payable
Example:
Adequate Disclosure enters into an operating lease arrangement to rent out its office building. The arrangement lasts for four years of equal rent payments of a total amount of $800,000. Record the journal entry for year one.
Rent Expense $200,000
Cash/Rent Payable $200,000