myz-vgb.ru A Business Encyclopedia

Capitalized Cost

Definition: A Capitalized Cost is the cost incurred in the purchase and financing of fixed assets. It includes not only the price paid for an asset but also the expenses incurred on its installation and transportation.

A capitalized cost is added to the fixed assets and is shown on the assets side of the balance sheet. These costs are not deducted from revenues during the period in which these are incurred, but, however, the deductions are made over a period of time in the form of depreciation, depletion, amortization.

capitalized cost

Initially, a capitalized cost is recorded as assets and thereafter is treated as an expense. The expenses that can be capitalized by the companies are acquisition and installation of assets, labor charges incurred in building an asset, interest paid on finance taken for the construction purposes, materials used to construct an asset, transportation cost incurred in bringing the asset to the site, etc.

By Capitalizing these expenses, a firm gets a clear picture of a total amount incurred on investment in assets and helps in determining the revenue earned over a period of time. The expenses reduce the net income, so a company capitalizes more and more of expenses thereby having more profits. But however, more profits attract more taxes, so a small company does not capitalize more expenses and try to maintain a balance between the costs incurred.

Leave a Reply

Your email address will not be published. Required fields are marked *

Shares

Related pages


transportation problem linear programming exampleclassically definitionindiffernce curveadvantages and disadvantages of equity capitalelements of promotion mixfactors affecting market segmentationthe carrot principle pdfretail promotion mix strategydefinition of chronicalbalanced mutual fund definitiontoday neft timingsequity and expectancy theory of motivationdefination of oligopolymarket structure microeconomicswhat does vroom mean14 principles of management by henry fayolexample of contractual vertical marketing systemprofitability ratios definitiondefine laissez faire leadershipdefinition of repo rateexplain the johari windowgordon allport's trait theorycynical unemploymentwhat is an autocratic leadership styleluft and inghammonopoly characteristics economicsdivested meaningdivest strategypavlovs theorydelphi approach to decision makingarbitrage finance definitionerg definitioncash outlay meaningwhat is cardinal utility theoryeconometrics meaningansoff growth strategywhat is scientific management theory by frederick taylorlow price elasticity of demandlife positions in transactional analysisincome tax return tdspavlov classical conditioning theory of learningdefinition oligopolygraph of marginal utilitywhats a aptitude testwhat does monetize debt meanwhat does whistle blowing meandefine the term market segmentationwhat is gangplank in managementfour elements of promotion mixfinancial reengineering definitionthe jahari windowautocratic managementhow to calculate asset turnover ratiohrm meansdefine collective barganingexample of total utility and marginal utilityloss leader pricing definitiontypes of retrenchmentwhat is quata samplingpure competition definition economicsmsf rbiobjectives of induction programme5 forces model by michael portertrait theoristteleological theory of business ethicsballoon payment mortgage definitionfayol's administrative theorycharacteristics of imperfect marketwhat is g2g meanwhat is macro environment in marketingvam definitionporters five forces analysisprocess of hrm planningexamples of capital employeddefine inducteddavid mcclelland theoryduality in linear programming