Which of the following statements regarding capitalization is correct?
A) Capitalizing costs refers to the process of converting assets to expenses.
B) If a company builds its own facility, only the cost of materials is capitalized.
C) Capitalizing a cost means to record it as an asset.
D) Capitalization is an immediate decrease in net income.

Question

Quizplus · Accepted Answer

Capitalizing a cost means to record it as an asset on the balance sheet, rather than immediately expensing it on the income statement. This allows the cost to be depreciated or amortized over time, spreading the expense out over the useful life of the asset.

Which of the Following Statements Regarding Capitalization Is Correct