Final answer:
Yes, investment or capital equipment must be accounted for and reported for capitalization and depreciation. These assets are vital for a firm's long-term production capabilities and must be capitalized and depreciated over their useful life for proper financial reporting.
Step-by-step explanation:
Assets defined as investment or capital equipment must indeed be accounted for and reported for purposes such as capitalization and depreciation. This is a key part of asset management for businesses as it allows for proper financial reporting and tax accounting. When a firm invests in such assets, which can be anything from machinery to office buildings, they are expected to be used in the production of goods or services over time.
Under generally accepted accounting principles (GAAP), when an asset exceeds a certain threshold of cost and is expected to provide economic value for multiple fiscal periods, it must be capitalized. This means that the cost of the asset is spread out or depreciated over the useful life of the asset, rather than being fully expensed in the year it is purchased. This accounting treatment reflects the consumption of the asset's economic value in generating future revenue.
Capital equipment represents a long-term investment and plays a role in a business's production capacity and capabilities. Therefore, the equipment is not only capitalized but also periodically depreciates to allocate the initial purchase price over its productive lifespan. This depreciation expense is then reflected on the firm's income statement over time, eventually reducing the book value of the equipment on the balance sheet.