What does capitalize mean?

http://blog.accountingcoach.com/capitalize/

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.

http://www.investopedia.com/terms/c/capitalize.asp#axzz2BYLxOunM

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.

Investopedia explains '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.

 

 

http://www.accountingtools.com/questions-and-answers/what-does-capitalize-mean.html

You capitalize an item when you record an expenditure as an asset, rather than an expense. This means that the expenditure will appear in the balance sheet, rather than the income statement.
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.