Final answer:
Capitalized costs lead to the creation of a structural asset and are depreciated over time, as opposed to being immediately expensed during a single accounting period like regular expenses.
Step-by-step explanation:
Capitalized costs differ from expenses in that only capitalized costs result in a structural asset. Capital refers to man-made resources that assist in the production of goods and services, which can include physical items such as machinery and buildings, as well as intellectual discoveries like computer software and music scores. Unlike expenses, which are consumed in the short term and matched with revenues of a specific accounting period, capitalized costs are amortized or depreciated over the useful life of the asset created. This means when a company capitalizes a cost, it is recognized on the balance sheet as an asset and expensed over time through depreciation or amortization, contributing to the generation of future economic benefits.
Fixed costs, a component of capitalized costs, do not change with the level of production in the short run. Examples of fixed costs include rent for factory space, cost of machinery, research and development costs, and advertising expenses. These costs are capitalized because they provide a benefit over multiple accounting periods and are crucial for the creation of capital which, in turn, enables more efficient production processes and can improve a company's profitability.