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How to understand Capitalize or expense（1）？

帮考网校2020-10-13 15:41:40

Capitalizing or expensing refers to the accounting treatment of a business expenditure. Capitalizing means adding the cost of an asset to the balance sheet and depreciating it over its useful life, while expensing means deducting the cost of an expense from the income statement in the year it was incurred. The decision to capitalize or expense depends on the nature of the expenditure and the company's accounting policies. Generally, expenses that benefit the current period are expensed, while expenses that benefit future periods are capitalized. Capitalizing can lead to higher profits in the short term, while expensing can reduce taxable income in the current year. It is important for businesses to understand the difference between capitalizing and expensing and to follow proper accounting standards to ensure accurate financial reporting.