4RQ - Horngren'S Financial And Managerial Accounting

Question

What does the word capitalize mean?

Step-by-Step Solution

Answer

Capitalized means that an asset account was debited (increased) because the company acquired an asset. 

Definition of Capitalize

The word capitalize is defined as recording the acquisition of land or building or any other fixed asset by increasing a long-term fixed asset. Or it is an ordinary operating expense to be charged against revenue for the period in which it is incurred. 

Need the Capitalizing

Need of the capitalize is used to record a cost or expenses on the balance sheet for the purpose of delaying the recognition of the expense and it’s used in corporate accounting to match the timing of cash flows. And capitalizing expenses is beneficial as companies are acquiring new assets with long-term life.