Capitalizing an expenditure rather than recording it as a revenue expenditure

Question

Quizplus · Accepted Answer

If an expenditure is capitalized, it is recorded as an asset and depreciated over its useful life, which affects the total book value of plant assets reported on the balance sheet. Additionally, capitalizing an expenditure will lower the amount of expenses shown on the income statement for that period, thus increasing net income. Therefore, it affects both the total book value of plant assets reported on the balance sheet and the amount of net income reported during a period.

Capitalizing an Expenditure Rather Than Recording It as a Revenue