What are capital items?

• A. Salaries and Benefits
• B. Advertising and Marketing
• C. Utilities
• D. Buildings, Equipment, and Furniture

Answer: (D)

Capital items are long-term tangible assets that a business uses to operate and generate value over multiple years. They’re purchased to support operations and aren’t consumed in a single period, so their cost is recorded on the balance sheet as assets and then depreciated over their useful life. Buildings, equipment, and furniture fit this category because they provide utility for many years and are actively used in the business’s day-to-day activities.

Salaries and benefits represent payments for labor and are expensed in the period in which the services are received. Utilities are ongoing costs tied to current operations and are expensed when incurred. Advertising and marketing costs are typically treated as expenses in the period they’re incurred, since they relate to current-year efforts to drive sales, rather than providing benefi ts over several years.