What Expenses Can Be Capitalized

Only those Expenditures are Capitalized which are of Capital Expenditures in Nature and only Revenue Expenditures are categorized as Expenses. Revenue Expenditures are, in fact, Expenses or Expired Costs because these can be utilized and benefits will be expired within the one year. Theses are incurred for running daily working of the business’s operations. Examples are Rent, Salaries, Wages, Utility Bills, etc.

See Also, “Difference Between Expenditures And Expenses”

Those expenditures which are acquired by the business for long-term basis especially i.e., for more than one year, need to be capitalized. An Example could be addition and installment cost added to the cost of Machinery that is a Fixed Asset / Non Current Asset. Any cost incurred for the installation of Machinery will be part of the cost of the Machinery. It is capitalized as it is the part of the cost of the Machinery and used for more than one year.