Capital Lease vs Operating Lease

[Mizi]

If a finance lease is considered a caoitalising activity, why does it result in lower income in earlier years compared to an operating lease??

 

[S2000magician]

Because the asset can be depreciated, and the sum of depreciation and interest expense is higher than the lease payment (rent expense under an operating lease).
I wrote a series of articles about leases that may prove helpful here: http://financialexamhelp123.com/leases-general/