When an expenditure is capitalized instead of being recorded as a revenue expenditure,what is the result?

Question

Quizplus · Accepted Answer

When an expenditure is capitalized, it is recorded as an asset on the balance sheet and not as an expense on the income statement. This increases the total book value of plant assets reported on the balance sheet. However, it also decreases the amount of net income reported during the period since the expenditure is not immediately expensed, but instead depreciated over its useful life. Thus, both the balance sheet and income statement are impacted.

When an Expenditure Is Capitalized Instead of Being Recorded as a Revenue