RE : Capitalise v expense

This topic has 3 replies, 2 voices, and was last updated 5 years ago by Stephen Widberg.

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February 12, 2021 at 11:08 pm #610184
nm11
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Dear Tutor-
please can you kindly explain these terms and how they affect the P&L account and SoFP – as I am not clear about them- sorry- ( as I didn’t do FA)

I understand when you expense something- that means it’s deducted in P&L so it reduces the entity’s profit & reduces the tax too- I’m correct

When you Capitalise an asset/loan/ development project etc – that means wat actually- i am not really sure- sorry

Many thanks
regards
Naomi
February 14, 2021 at 9:51 am #610332
Stephen Widberg
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Expense – P&L – e.g. research costs

Capitalise – SFP – e.g. development costs, PPE (usually used for NCA)

If in doubt write ‘recognise in P&L’ or ‘recognise in SFP’.
February 14, 2021 at 1:34 pm #610377
nm11
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Thank you

When you Capitalise an asset/loan/ development project etc – that means wat actually ??- i am not really sure- sorry
February 15, 2021 at 4:09 pm #610537
Stephen Widberg
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No worry – it means ‘recognise as non – current asset in the balance sheet’ – e.g. Dr PPE
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