The term "gray area" is a standard idiom used in accounting and finance to describe situations where rules are not clearly defined, and the appropriate treatment is ambiguous. The decision to capitalize an expenditure (treating it as an asset) versus expensing it (recognizing it as a cost immediately) is a classic example. While general principles exist, their application to specific facts—such as distinguishing between routine maintenance and a value-enhancing capital improvement—requires significant professional judgment, placing the decision squarely in a gray area.

A. White area: This term implies a situation that is clear and unambiguous, which is the opposite of the subjective decision described in the question.

C. Red area: This term typically signifies danger, prohibition, or financial loss ("in the red"), which is not relevant to the concept of accounting subjectivity.

D. White and gray area: This is not a standard idiom. The term "gray area" itself sufficiently captures the ambiguity between clear "white" and "black" rules.

1. Hitchner, J. R. (2017). Financial Valuation: Applications and Models (4th ed.). In Chapter 3, "Financial Statement and Company Risk Analysis," the text discusses the need for analysts to scrutinize discretionary expenses and accounting choices. The distinction between repairs/maintenance (expensed) and capital improvements (capitalized) is highlighted as a key area of management judgment that affects the quality of earnings and requires normalization, embodying the concept of an accounting "gray area."

2. Mercer, Z. C., & Harms, T. W. (2018). Business Valuation: An Integrated Theory (3rd ed.). Wiley. Chapter 5, "Financial Statement Analysis and Adjustments for Business Valuations," explains that a core task for a valuation analyst is to make normalizing adjustments. These adjustments often address subjective accounting decisions made by management, such as the capitalization of certain costs, which are not clearly dictated by accounting principles and thus reside in a "gray area."

3. Kieso, D. E., Weygandt, J. J., & Warfield, T. D. (2019). Intermediate Accounting (17th ed.). Wiley. Chapter 10, "Acquisition and Disposition of Property, Plant, and Equipment," explicitly discusses the complexities in classifying costs incurred after acquisition. The text notes that distinguishing between expenditures that should be capitalized and those that should be expensed "presents problems of classification" and requires judgment, which is the definition of a gray area. (See section: Costs Subsequent to Acquisition).