Title: Capitalization Rules in Accounting | Bizfluent
Headings: Capitalization Rules in Accounting
Capitalization Rules in Accounting
Capital Improvements to Land
Capital Improvements to Buildings
Capital Improvement to Equipment
Capital Improvement to Vehicles

Content: Capital Improvements to Land
Capital improvements to land should expand the property's usefulness and increase its value. For example, let’s say you build a fence around a parcel of land. You can treat this cost in one of two ways: you can treat it like any ordinary cost by debiting an expense and reducing your net income, or you can debit the cost as an asset and increase the value of the asset. The former treatment will reduce your net income and reduce income taxes. The latter will increase the value of an asset and make the asset worth more upon resale. Building a fence around a parcel of land increases its usefulness as well as its value, and should be capitalized. Capital Improvements to Buildings
Capital improvements to buildings can include a new roof, new flooring, or a new air conditioner. Expenses such as janitorial services, while keeping the building clean, do not add to the life or efficiency of the building and should not be capitalized. Expenses such as new paint or new carpet in a building also do not sufficiently extend the life of the structure.