How is preventative maintenance typically expensed?

How is preventative maintenance typically expensed?

• A. Directly to the branch on a monthly basis
• B. Spread over multiple months
• C. As a one-time charge
• D. Not included in operating costs

Answer: (B)

Preventative maintenance is typically expensed by spreading the costs over multiple months rather than recognizing the expense all at once or excluding it entirely. This practice aligns with the matching principle in accounting, which states that expenses should be recorded in the same period as the revenues they help to generate. By allocating the cost of preventative maintenance over time, companies can more accurately reflect the ongoing benefit derived from maintaining equipment and facilities in good working condition. This approach also helps to smooth out expenses, providing a clearer picture of financial performance over time and ensuring that maintenance costs do not disproportionately impact a single reporting period.

Preventative maintenance is typically expensed by spreading the costs over multiple months rather than recognizing the expense all at once or excluding it entirely. This practice aligns with the matching principle in accounting, which states that expenses should be recorded in the same period as the revenues they help to generate. By allocating the cost of preventative maintenance over time, companies can more accurately reflect the ongoing benefit derived from maintaining equipment and facilities in good working condition. This approach also helps to smooth out expenses, providing a clearer picture of financial performance over time and ensuring that maintenance costs do not disproportionately impact a single reporting period.