Examples of land improvements include paved parking areas, driveways, fences, outdoor lighting, and so on. Land improvements are recorded separately from land, because land improvements have a limited life and are depreciated. Land is assumed to last indefinitely and will not be depreciated.

Land improvements are recorded in a general ledger asset account entitled Land Improvements. The depreciation of land improvements will result in depreciation expense on the company's income tax return. This will reduce its taxable income and will reduce a profitable company's income tax payments.

An example of a leasehold improvement is the permanent improvement to a building that is being rented under a 10 year lease. For instance, the tenant might construct permanent walls and offices inside of the warehouse that it leases from the owner. The lease will likely state that all improvements to the building will belong to the owner of the building. The amount spent by the tenant to improve the building will be recorded by the tenant in its asset account Leasehold Improvements. Generally, the amount of these leasehold improvements will be depreciated by the tenant over the useful life of the improvements or over the life of the lease, whichever is shorter. The depreciation expense associated with the leasehold improvements will reduce the tenant's taxable income and its income tax payments if the company is profitable.