when trying to discern what a capitalized cost is it s first important to make the distinction between what is defined as a cost and an expense in the world of accounting a cost on any transaction is the amount of money used in exchange for an asset 
a company buying a forklift would mark such a purchase as a cost an expense is a monetary value leaving the company this would include something like paying the electricity bill or rent on a building the use of the word capital to refer to a person s wealth comes from the medieval latin capitale for stock property limitations of capitalizingto capitalize assets is an important piece of modern financial accounting and is necessary to run a business however financial statements can be manipulated for example when a cost is expensed instead of capitalized if this occurs current income will be understated while it will be inflated in future periods over which additional depreciation should have been charged 