Which type of asset should generally be capitalized rather than expensed immediately?

Introduction / Context:
One of the key judgements in accounting for property, plant and equipment is whether to capitalise a cost as an asset or to expense it immediately. Capitalising means recording the cost on the balance sheet and then depreciating it over its useful life. Expensing means charging the entire amount to the income statement in the current period. This question tests whether you understand that significant assets providing long term economic benefits should usually be capitalised, while small or short term items are normally expensed.

Given Data / Assumptions:
- We are asked which type of asset should be capitalised. - Options include stationery, major machinery, utility bills and routine maintenance costs. - We assume a normal materiality threshold and standard accounting policies. - We must select the cost that meets the criteria for capitalisation.

Concept / Approach:
An expenditure should be capitalised when it meets the asset definition: it is a resource controlled by the entity as a result of past events and is expected to provide future economic benefits beyond the current period. Examples include purchasing machinery, buildings, vehicles and computers that will be used over many years. These assets are then depreciated systematically over their useful life. In contrast, costs that relate to day to day operations or are consumed quickly, such as stationery, utilities and routine repairs, are treated as expenses. Routine maintenance restores assets to their original condition but does not extend useful life significantly and is therefore expensed. Major upgrades and improvements that increase capacity or extend useful life may be capitalised, but simple periodic maintenance is not.

Step-by-Step Solution:
Step 1: Identify which option describes an item that will generate benefits over multiple accounting periods. Step 2: Observe that major machinery and equipment are used in production or service delivery for many years, so they meet the future benefits criterion. Step 3: Note that stationery, electricity and water are consumed quickly within the current period and therefore do not create a long term asset. Step 4: Recognise that routine maintenance expenses keep assets in working order but do not significantly increase capacity or life, so they should be expensed, not capitalised.

Verification / Alternative Check:
Refer to standard accounting policies in any company's financial statements. You will find that property, plant and equipment are capitalised and depreciated, while items such as office supplies, utilities and maintenance are treated as operating expenses. In exam problems, when a cost is associated with acquiring or constructing an asset that will be used for several years, it is generally capitalised, which supports choosing the machinery option here.

Why Other Options Are Wrong:
Low-cost office stationery: These items are usually material only in small amounts and are consumed quickly, so they are expensed in the period of purchase. Monthly electricity and water bills: These are recurring operating expenses related to current period usage and do not meet the definition of a long term asset. Routine maintenance expenses: These restore or maintain an asset's normal operating condition but do not create a new asset or extend useful life significantly, so they are expensed as incurred.

Common Pitfalls:
A common mistake is to assume that any large payment should be capitalised. Size alone is not the determining factor; the key is whether the expenditure leads to future economic benefits beyond the current period. Another pitfall is capitalising routine repairs, which can artificially inflate assets and profits. Examiners often include a mix of expenditures to test whether you can distinguish between capital and revenue expenditure correctly.

Final Answer:
The correct option is Major machinery and equipment that will be used to generate benefits over several years, because such assets meet the criteria for capitalisation and are depreciated over their useful lives.