Capital Expenditures vs. Revenue Expenditures
When Should Costs Be Capitalized?
A capital expenditure increases an asset's future economic benefits and is recorded as part of the asset's carrying amount. Revenue expenditures maintain the asset's current operating condition and are recognized as expenses when incurred.
Tip
Ask whether the expenditure creates additional future benefits. If yes, it is usually capitalized.
Summary
Capital expenditures increase future benefits, while revenue expenditures maintain existing benefits.