- Capitalized Cost
- An expense that is added to the cost basis of a fixed asset on a company's balance sheet. Capitalized Costs are incurred when building or financing fixed assets. Capitalized Costs are not expensed in the period they were incurred, but recognized over a period of time via depreciation or amortization.
Capitalizing costs is an attempt to follow the Matching Principle of accounting. The Matching Principle seeks to match expenses with revenues. In other words, match the cost of an item to the period in which it is used, as opposed to when the cost was incurred. As some assets have long lives and will be generating revenue during that useful life, their costs may be amortized over a long period.
An example of this would be costs associated with constructing a new factory. The costs associated with building the asset (including labor and financing costs) can be added to the carrying value of the fixed asset on the balance sheet. These capitalized costs will be recognized in future periods, when revenues generated from the factory output are recognized.
Investment dictionary. Academic. 2012.
Look at other dictionaries:
capitalized cost — The total price of the vehicle, in effect, its purchase price. In theory, the cap cost should equal the amount you would pay for the vehicle if you were purchasing the vehicle. When a lease is made, the dealer sells that vehicle to the leasing… … Dictionary of automotive terms
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cost reduction — See cap cost reduction capitalized cost reduction … Dictionary of automotive terms
capitalized — See net capitalized cost … Dictionary of automotive terms
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Capitalized — Recorded in asset accounts and then depreciated or amortized, as is appropriate for expenditures for items with useful lives greater than one year. The New York Times Financial Glossary * * * capitalized cap‧i‧tal‧ized [ˈkæptl aɪzd] also… … Financial and business terms