What does capitalize mean?

The word capitalize means to record the amount of an item in a balance sheet account as opposed to the income statement. (The accounts in the general ledger and in the chart of accounts consist of two types of accounts: balance sheet accounts and income statement accounts.)To illustrate, let's assume that your company purchases a new computer printer for your office. Its cost is $700. If your company is a small company, it might capitalize the cost of the printer. That means the printer will be included in an equipment account and will be reported in the property, plant and equipment section of the balance sheet. Its cost will be depreciated over the printer's useful life. A larger company might decide that $700 is an immaterial amount and will not capitalize the printer as an asset. Rather, the large company will expense the printer immediately. (This larger company might have a policy of not capitalizing any asset with a cost of less than $1,000 because of the materiality convention. This is allowed because no reader of the financial statement is going to be misled because the $700 will appear in the year the printer is purchased instead of $140 in that year and $140 in each of the subsequent four years.)Another example of capitalize involves leased equipment. If your company leases a forklift truck, is the lease a rental agreement, or is the lease really a disguised purchase and financing arrangement? If it is the latter, then the forklift truck and the lease should be capitalized. The forklift truck should appear on the balance sheet as part of the company's equipment, and the amount of principal owed needs to be reported as a liability on the balance sheet.

1. In accounting, it is where costs to acquire an asset are included in the price of the asset.2. The sum of a corporation's stock, long-term debt and retained earnings. Also known as "invested capital".3. A company's outstanding shares multiplied by its share price, better known as "market capitalization".Investopedia Says:1. For example, if a machine has a price of $1 million this value would be recorded in the assets, if there was also a $20,000 charge for shipping the machine then this cost would be capitalized and included in assets.2. The capitalization of a firm can be overcapitalized and undercapitalized, both of which are potential negatives.3. If a company has1,000,000 shares and is currently trading at $10 a share, their market capitalization is $10,000,000.Real Estate Dictionary: Capitalization1. In finance, a process whereby anticipated future income is converted to one lump sum capital value. A Capitalization Rate is divided into the expected periodic income to derive a capital value for the expected income. Sum of Interest Rate and Recapture Rate. See Capitalization Rate.Example: A property is expected to produce an annual income of $10,000. It is judged to have a value of $80,000, which represents capitalization of the $10,000 per year income stream. Also, when taxes on the property increased by $500 per year, the property's value was reduced by $6,000 due to the capitalization process.2. In accounting, setting up an Asset on the financial records, rather than deducting it currently.Example: Capitalization is required for an asset that has a15-year Depreciable Life the cost will be deducted over that time period, not deducted currently.Accounting Dictionary: Capitalization1. Total amount of the various securities issued by a corporation. Capitalization may include bonds, preferred and common stock. 2. A technique used by real estate appraisers to convert the income of a property into a value estimate for that property.

You would normally capitalize an expenditure when it meets both of these criteria:

• Exceeds capitalization limit. Companies set a capitalization limit, below which expenditures are deemed too immaterial to capitalize, as well as to maintain in the accounting records for a long period of time. A common capitalization limit is $1,000. The materiality  principle applies to the capitalization concept.
• Has useful life of at least one year. If an expenditure is expected to help the company generate revenues for a long period of time, then you should record it as an asset and then depreciate it over its useful life, which agrees with the matching principle.

Here are several examples to illustrate the concept:

• A company pays $500 for a notebook computer. The computer has a useful life of three years, but it does not meet the company's $1,000 capitalization limit, so the controller charges it to expense in the current period.
• A company pays $2,000 for maintenance on a machine. The payment exceeds the company's capitalization limit, but it has no useful life, so the controller charges it to expense in the current period.
• A company pays $3,000 for a router. The router has a useful life of four years and surpasses the corporate capitalization limit of $1,000, so the controller records it as a fixed asset and begins depreciating it over its useful life.

A special situation is an asset that is being paid for under a leasing arrangement. If the intent of the lease is essentially to finance the purchase of an asset by the lessee, and it meets with the capitalization criteria noted above, then you should record it as a fixed asset. This type of lease is known as a capital lease.

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The word capitalize means to record the amount of an item in a balance sheet account as opposed to the income statement.

capitalize means to record an asset into the fixed asset. generaly this terminology is used to transfer machineries from work in progress accounts to fixed assets.

For an Example if we purchased a assets we will not book the assets as a fixed assets 

until it become usable. there will some other cost to be incurd so purchased assets will be 

in CWIP( capital working Process) once assets become usable. can transfer to asssets account 

call as capitalizing. please do let me know if there is any correction.

Capitalize means to record certain expense in balance sheet. It is also called capital expenditure. Any purchased item, which will give benefit to the company for more than1 year should be capitalized and recorded as an Asset. e.g. purchase of office furniture

Capitalize means to recognise in the statement of financial position as asset.