Capitalize

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DEFINITION of 'Capitalize'

An accounting method used to delay the recognition of expenses by recording the expense as long-term assets.

In general, capitalizing expenses is beneficial as companies acquiring new assets with a long-term lifespan can spread out the cost over a specified period of time. Companies take expenses that they incur today and deduct them over the long term without an immediate negative affect against revenues.

BREAKING DOWN 'Capitalize'

If a company capitalizes regular operating expenses, it is doing so inappropriately, most likely to artificially boost its operating cash flow and look like a more profitable company. Because a company can't hide its expenses forever, such a practice will fail in the long run.

It is important not to confuse capitalize with capitalization.

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