What type of lease primarily defines rental payments recorded as an expense by the lessee?

An operating lease primarily defines rental payments that are recorded as an expense by the lessee. In this leasing arrangement, the lessor retains ownership of the asset, and the lease term is typically shorter than the asset's economic life. Therefore, the lessee does not capitalize the lease on their balance sheet but rather recognizes lease payments as an expense in their income statement. This treatment aligns with the idea that the lessee is using the asset without committing to long-term ownership, thus, the rental payments are treated as operating expenses.

On the other hand, finance leases, capital leases, and full-service leases typically involve either transferring ownership or containing terms that require the lessee to capitalize the lease, leading to different accounting treatment. In these other types of leases, payments may not be expensed in the same manner, as they would instead be reflected as liabilities and assets on the balance sheet.