Capitalized cost is an expense that is added to the cost basis of a fixed asset on a companys balance sheet. It is incurred when building or purchasing fixed assets, which are usually long-term assets that are expected to directly produce cash flows or other economic benefits in the future. Capitalized costs are not expensed in the period they were incurred but recognized over a period of time via depreciation or amortization. The purpose of capitalizing costs is to better line up the cost of using an asset with the length of time in which the asset is generating revenue. Companies each have a dollar value threshold for what it considers an expense versus a capitalizable cost. Employee salaries and bonuses may be capitalized in certain situations. Capitalized costs can include intangible asset expenses like patents, software creation, and trademarks. Examples of capitalized costs include materials used to construct an asset, sales taxes related to assets purchased for use in a fixed asset, installation costs, labor charges, and transportation costs.