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General Accounting Discussions: Capitalization

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  1.  
    • CommentAuthorlmtra
    • CommentTimeAug 31st 2008
     
    What is capitalization?

    What consider to be capitalized?

    Thank you!
  2.  
    Basically money invested to build a business .. new and continuing. The owner invests the original capital to buy or lease the necessary property to commence business operations. A building, leasehold improvements, equipment, vehicles and funds to purchase inventory and supplies.

    On a balance sheet all but the supplies are Assets. (supplies would be expensed upon opening the business). Liabilities on the balance sheet would be any loans he obtained to finance the purchase of any of the assets. The Capital portion of the balance sheet consists of the owners investment, original and continuing.

    Assets
    Building 450,000
    Leasehold Improvements 125,000
    Equipment 80,000
    Vehicles 40,000
    Inventory 100,000

    Total Assets 795,000

    Liabilities
    Accounts Payable (Inventory) 100,000
    Loan on Building & Improvements 546,250
    Equipment Loan 64,000
    Vehicles Loan 32,000

    Total Liabilities 748,500

    Capital
    Additional Paid-In Capital 45,500
    Common Stock ($1 Par) 1,000

    Total Capital 46,500

    Total Liabilities and Capital 795,000

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