pp&e assets are capitalized (placed on the balance sheet, not expensed all at once)

other items added to pp&e: sales tax, setup costs, freight, key (all costs necessary to get the asset ready for its intended use

add together: sales tax, setup costs, freight, key

(this is the starting point for depreciation and is the cost on the balance sheet before any depr. exp

items that are recurring in nature (generally):

property taxes, insurance

items not part of the asset acquisation should not be capitalized

-part of the pp&e balance sheet category

-not depreciated

-items included in the cost of land: invoice/purchase price of land, costs to clear the land for its intended use, real estate fees & closing cost fees, key

capital expenditure - the expenditures benefits extend beyond the current period

examples: pp&e, intangible assets, other long term assets

capitalized cost - generally found on balance sheet

revenue expenditure - the expenditures benefits do not extend beyond the current period

example: salary of an office worker

accrual accounting tries to match the benefits (revenues generated) with the expenses that created the benefits

assets used -> benefits received

match -> benefits with -> expenses

reduces net income, is not a cash outflow, a credit to a/d reduces total assets

a/d is a contra asset; its not closed, will be on the balance sheet

recording of depr. is not an attempt to measure fmv. depr. is just the systematic allocation of the cost of an asset over the life of the asset

capitalized cost - salvage value

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estimated useful life

same depr. exp. every year!

capitalized cost - salvage value

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estimated output (can be hours, units produced, miles, etc)

this answer x actual output = depr. exp