Which of the following statements regarding capitalization is correct?
A)Capitalizing costs refers to the process of converting assets to expenses.
B)All costs incurred to acquire an asset may be capitalized.
C)Capitalizing a cost means to record it as an asset.
D)Capitalization results in an immediate decrease in net income.

Question

Quizplus · Accepted Answer

Capitalizing a cost means recording it as an asset on the balance sheet rather than an expense on the income statement. This results in an increase in total assets and no immediate impact on net income. Option A is incorrect because capitalizing costs means converting expenses to assets rather than the other way around. Option B is incorrect because only costs directly related to acquiring or improving an asset can be capitalized, not all costs. Option D is incorrect because capitalization does not result in an immediate decrease in net income.

Which of the Following Statements Regarding Capitalization Is Correct