Capitalization

the recording of money spent as an asset

recording future benefit

the opposite of capitalization

supplies
prepaid insurance
inventory
equipment
creates a new asset
extends the useful life of an asset(like replacing engine)

costs that were anticipated when the asset was purchased (when estimating its useful life), keep the asset in a normal working condition.

things that cant be capitalized are expensed.

advertising
research & development
repair & maintenance

assets that have no physical existence ( e.g. patents, trademarks, copyrights, customer data

intangible assets are generally not recorded (ignored) because it is difficult to determine their worth.

Exception: we record intangible assets when they are purchased by the company

for research and new technologies

do not last forever average time is 7 years

for brands

for artist

the process of decreasing an account over time. This term is also applied to represent the use of an intangible asset.

intangible assets are amortized.

Cost.

years of useful life

usually uses the straight-line method
no residual values to intangible assets
no 'accumulated amortization' account (assets are credited directly instead)
how we deal with intangible assets that have definite lives ( they expire)

Amortization expense #

Patent #

the excess purchase price for a company-paid above & beyond a company's "recognized value"

the purchase price paid for a company - market value of its net assets

The market value of assets - the market value of liabilities = market value of equity