While capital and repair expenditures have been long recognized in both the accounting and tax area, deciding whether to capitalize or expense fixed asset-related expenditures still causes significant issues for the rest of us.

All companies utilize fixed asset to run businesses they make, therefore the decision whether to expense or capitalize fixed asset-related expenditure is critical and always happened in any companies—big and small—along the operation.

In the accounting area, the right decision is needed in the aim of pursuing the matching principle—expenses should well match revenues being generated for the period. For example: a small manufacturer, in 2011, spent $15K to upgrade a machine in its production line. Average annual expense for the manufacturer is only $30K to generate revenue of $40K, annually. If the manufacturer expensed all the 15K for the 2011, total expense would be $45 while the revenue stayed the same, $40K—which were unmatched.