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Simple English definitions for legal terms
capitalized expense
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A quick definition of capitalized expense:
A capitalized expense is a type of business expenditure that provides a long-term benefit. This means that the expense is not immediately deducted from the company's revenue, but instead, it is used for depreciation or amortization. Examples of capitalized expenses include investments in property, equipment, or software. Unlike regular expenses, capitalized expenses are not tax-deductible.
A more thorough explanation:
A capitalized expense is an expense made by a business to provide a long-term benefit. It is also known as a capital expenditure. Unlike regular expenses, a capitalized expense cannot be deducted immediately. Instead, it can be used for depreciation or amortization over a period of time.
For example, if a company buys a new building, the cost of the building is a capitalized expense. The company cannot deduct the entire cost of the building in the year it was purchased. Instead, the cost is spread out over the useful life of the building through depreciation or amortization.