Accounting for startup costs

What are Startup Costs?

Startup costs are the expenditures associated with organizing a new business or introducing a new product. Once the startup period has been completed, these costs should go away. Examples of startup costs are as follows:

  • Accounting and legal startup costs

  • Employee salary-related costs

  • Employee training

  • Feasibility studies

  • Recruiting costs

  • Travel costs

Accounting for Startup Costs

The accounting for startup activities is to expense them as incurred. While the guidance is simple enough, the key issue is not to assume that other costs similar to start-up costs should be treated in the same way. Thus, you must review other elements of GAAP to find the proper treatment of other costs, such as customer acquisition costs, loan origination costs, research and development costs, and the cost of internally developed assets. In some cases, these other costs should be capitalized over a number of years.

Related AccountingTools Course

GAAP Guidebook