The difference between capital and expense items is not only the size and length of use, but also the way the accounting department handles production costs.

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Capital items are assets that provide benefits for more than one year, such as machinery or buildings, and are depreciated over their useful life. Expense items are costs incurred during the production or operating process, like raw materials or utilities, and are fully deducted in the period they are incurred. The accounting treatment differs significantly between the two, with capital items being capitalized and depreciated over time, while expense items are expensed immediately, affecting the financial statements differently.

The Difference Between Capital and Expense Items Is Not Only