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Finance Dictionary and Glossary of Investment Terms
An accounting method used to delay the recognition of expenses by recording the expense as a long term asset.
To classify a cost as a long-term investment, rather than charging it to current operations. A capitalized cost does not appear on the income statement, but instead appears as a credit on the long-term assets account and a debit on the cash account of the balance sheet. However, the depreciation expense related to the capitalized cost will appear as an expense on the income statement. Since the long-term assets account is larger due to the effect of capitalization, the depreciation costs are also proportionately larger. Thus, the timing of expense recognition is changed, but eventually all expenses do get recognized on the income statement.