Carnforth plc incurred the following costs during the year to 31 December 2015 associated with purchasing new equipment:

Regarding the cost associated with PPE, why is it important to distinguish between costs that are expensed in the period and costs that are capitalized? You should discuss how the two types of costs are different in nature and also provide an analysis of the effect on the current and future net income of capitalizing items that should be expensed.

Items Equipment Promotion and advertising cost Taxation on purchase General overhead costs Installation costs Administration costs Delivery and handling costs Cost 125,000 1,500 12,500 500 1,200 500 1,000