Title: GAAP Accounting for Capital Improvements | Bizfluent
Headings: GAAP Accounting for Capital Improvements
GAAP Accounting for Capital Improvements
TL;DR (Too Long; Didn't Read)
Fixed Assets and Useful Life
Repair vs. Capital Improvement in GAAP
Expense and Improvement Bookkeeping
Improvements to Land
Depreciating Capital Improvements
Setting the Cap Limit
Case by Case
Must I Use GAAP?
Capital Improvements and Taxes
Section 179
Bonus Depreciation
Tax Depreciation of Improvements

Content: Replacing the engine is a capital improvement, as it extends the life of the car. Adding a hydraulic lift to a truck qualifies as increasing its overall value. Expense and Improvement Bookkeeping
Under GAAP, when your company repairs a fixed asset, you record it as an expense in your accounting journals. For example, suppose you pay $300 to fix a brake problem in your company truck. You report $300 of spending in cash or accounts payable and enter $300 in the vehicle maintenance account. Now, suppose that instead of a $300 repair, you spend $4,000 installing a new engine, which is over the $2,500 cap limit. You record the $4,000 bill in cash or accounts payable and add $4,000 to the account for vehicle assets. You make the same sort of journal entries for building improvements or major upgrades to factory equipment. Improvements to Land
The accounting treatment for building improvements works like other capital improvements. If you're making improvements to land, however, it gets more complicated.