major types of expenditures

• Additions

  • increases the physical size or capacity of an asset
  • capitalized!
• Improvements or betterments

  • increase the service life or the capacity of an asset
  • expenditures are capitalized and added to the cost
• Replacements

  • involve substitution
  • not necessarily that the new asset is better than the old one
• Replacements are classified into the following:

  1. replacement of an old asset with a new one - cost of replacement is capitalized
  2. replacement of MAJOR parts - capitalized expenditure
  3. replacement of MINOR parts - expense
• Rearrangement

  • relocation or reinstallation of an asset
  • cost is expensed unless it is probable of future economic benefits