Why are certain costs of doing business capitalized when incurred and then depreciated or amortized over subsequent accounting cycles?
A) To reduce the federal income tax liability
B) To aid management in cash-flow analysis
C) To match the costs of production with revenues as recognized
D) To adhere to the accounting constraint of conservatism

Question

Quizplus · Accepted Answer

Capitalizing and amortizing certain costs of doing business allows for the matching principle, which ensures that the costs of production are recognized in the same accounting period as the revenues they help generate. This provides a more accurate representation of a company's financial position and performance.

Why Are Certain Costs of Doing Business Capitalized When Incurred