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Why is capitalized labor a negative expense on the income statement?

Most companies have a separate trial balance account to record any labor that has been capitalized (under ASC 350). Basically, the company would have the salaries of the internal employees flowing through the salary expense account as normal.

However, for the wages that were capitalized, they are a negative expense (i.e. reduce expense) because they are being removed from the income statement and being capitalized to the balance sheet. Those wages will then be depreciated over the useful life and will flow through depreciation expense.


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