Title: What Is a Capital Improvement Asset on a Balance Sheet? | Bizfluent
Headings: What Is a Capital Improvement Asset on a Balance Sheet?
What Is a Capital Improvement Asset on a Balance Sheet?
Definition
Bookkeeping
Reporting
Financial Implications

Content: Under accounting guidelines, an improvement is a capital betterment asset if it extends the estimated operational life of the asset, increases its capacity or efficiency, and the improvement increases the quality of outputs or reduces previously assessed operating expenses. Bookkeeping
To record capital improvement expenses, a corporate bookkeeper credits the cash account and debits the corresponding capital improvement asset account, which is a fixed asset account. In accounting terminology, crediting cash means reducing company money. Fixed assets are those a business will use for several years, so it makes sense to include capital improvement expenses in the "fixed assets" category. Capital improvement assets are subject to depreciation, which spreads the resources' costs over the number of years an organization will use them. To depreciate a capital improvement asset, debit the depreciation expense account and credit the accumulated depreciation account. 00:00
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Reporting
As long-term assets, capital improvement assets make their way into the "property, plant and equipment" (PPE) section of a balance sheet. The PPE section is where accountants lump all fixed assets, a move aimed at regulatory compliance and analytical convenience. Accumulated depreciation is a contra-account that reduces the value of the corresponding capital improvement asset over the depreciation term, which may span anywhere from a few months to two or three decades -- as is often the case for highways. Financial Implications
Capital improvement assets often call for significant costs, and a company's leadership ensures these expenses don't break the operating bank.