Capitalization in an accounting context means the price to purchase an asset which is actually included in the price of the asset whereas in the financial context it is the price which is required to buy an asset which comprises of price of a specific asset, and it also includes the company’s retained earnings with the stock debt and even the long term debt. Capitalization is of two kinds which are Overcapitalization and Undercapitalization .

Point to be noted:- Go through this Q&A very thoroughly as this is one of the essential Financial accounting questions.

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