Question

Can all assets be capitalized? What are the rules regarding capitalizing an asset?

Answer 1

Solution:

Generally assets are not capitalized. The rules of determining that an assets should be capitalized or not is depend on useful life of assets and thershold set by business. If any assets is having useful life of more than one year and cost is above thershold set by business, is capitalized and depreciation is charge over the useful life of assets. For example, a business may set thershold of $2,000. It means assets having value greater than $2,000 and useful life more than one year will be capitalized and assets having value less than $2,000 will be expensed in the same year.