Question

Let's suppose that a company spends $200,000 on a variety of costs. In general, there are...

Let's suppose that a company spends $200,000 on a variety of costs.

In general, there are two possible ways to account for these costs:

1. Debit Asset, $200,000; credit Cash, $200,000

2. Debit Expense, $200,000; credit Cash, $200,000

Briefly explain in 2-3 sentences the general rule of how the company determines whether the costs should be capitalized or expensed.

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