Expensing a cost indicates it is included on the income statement and subtracted from revenue to determine profit. Capitalizing indicates that the cost has been determined to be a capital expenditure and is accounted for on the balance sheet as an asset, with only the depreciation showing up on the income statement.

What does expensing an asset mean?

Expensing involves wrapping expenditures in as operating costs rather than designating them as capital investments. As a result, these expenses are immediately deducted from income, rather than moving to the asset section of a balance sheet.

Are prototypes an asset or expense?

This is because prototype is not an asset. Its a part of the product discovery or R&D process, which is categorised as Op Ex or Operating Expenses. This point in time is often referred to as technical feasibility establishment and acts as the starting point for capitalisation.