If a business expenditure creates or enhances an identifiable asset with a useful life substantially beyond the current year, the expenditure must be capitalized.

Question

Quizplus · Accepted Answer

According to Generally Accepted Accounting Principles (GAAP), if a business expenditure creates an identifiable asset with a useful life beyond the current year, the expenditure must be capitalized (recorded as an asset on the balance sheet) rather than expensed immediately. This is to ensure that the cost of the asset is allocated over its useful life, rather than all at once in the current period.

If a Business Expenditure Creates or Enhances an Identifiable Asset