Skip to main content

Capital expenditures are the funds used by a company to purchase assets or to upgrade and maintain physical assets such as property, plants, buildings, technology, or equipment. Capital expenditures are used to start new company projects or can be used by the company for investment opportunities. Some examples of capital expenditures can include things like new equipment, machinery, land, plant, buildings or warehouses, furniture and fixtures, business vehicles, software, or intangible assets such as a patent or license. 

It is important to understand how Capital expenditures are used because of their long-term effects, irreversibility, high initial costs, and depreciation. Capital expenditures can have long-term effects because the decisions made on which asset to purchase can extend well into the future of a company. It is also very difficult to reserve the decision of a Capital expenditure without the company experiencing some type of loss. Capital expenditures can be very expensive to purchase for companies that specialize in production, manufacturing, and utilities. Physical assets such as buildings and equipment can provide a company with future benefits but may need initial renovations to be functional. Also, it is important to consider the depreciation of a capital expenditure when deciding what to purchase. 

What are Capital Expenditures?

Capital expenditure can also be referred to as a capital expense and is often abbreviated as (CapEx), and as mentioned above are the funds a company uses to purchase long-term assets for the improvement and efficiency of the company. Capital expenditures are listed on the balance sheet as an investment for a particular accounting period. Capital expenditures normally have a large impact on the company’s short-term and long-term financial standing. So, it is important to make wise capital expenditure decisions for the financial health of a company.

What are the Examples of Capital Expenditures?

Capital expenditures are often considered in two types: the expenses needed to maintain the levels of operation within a company, and the expenses needed to enable the company to increase in future growth. 

A capital expense can either be tangible, such as a machine, or intangible, such as a patent. Both tangible capital and intangible expenditures are usually considered assets since they can be sold when there is a need. Below is a list of just a few examples of what can be considered a capital expenditure: 

  • Land 
  • Buildings 
  • Office Furniture
  • Computers 
  • Office Equipment
  • Computers 
  • Office Equipment 
  • Machinery 
  • Vehicles 
  • Patents 
  • Copyrights 
  • Trademarks 
  • Licensing and rights
  • Software

What is the Importance of Capital Expenditures in a Company?

It is important to understand how capital expenditures are used in a company because of their impact on the company’s finances, but capital expenditures can also depreciate over time. The decision on how much to invest in capital expenditures is extremely important because of the following: 

  • Long-term Effects

The decisions on what type of capital expenditure to purchase can have major effects on a company long into the future. A company’s present production or manufacturing is a direct result of the decisions made on past capital expenditure purchases. These decisions are the forces that help steer a company in a particular direction. 

  • Irreversibility 

The decision to purchase a particular capital expenditure may be difficult to reverse without causing the company to experience some type of loss. Capital expenditures are often made to meet a company’s specific needs or requirements, making it difficult to sell the product to other companies once it is no longer needed or useful. 

  • High Initial Costs 

Capital expenditures are characteristically very expensive, especially for companies in industries such as production, manufacturing, telecom, utilities, and oil exploration. Capital investments in physical assets like buildings, equipment, or property offer the potential of providing benefits in the long run but will need a huge monetary outlay initially, and much greater than regular operating outlays. 

  • Depreciation 

Capital expenditures can help to increase a company’s assets in the beginning but once they are in service they can quickly start to depreciate. 

How to Calculate Capital Expenditures?

The cash flow statement of a company will show what type of capital expenditures were made during a period. You can also use a formula to calculate capital expenditures. You will need to locate items on the income statement and balance sheet. Below is a list of the items you will need and where to find them. 

  1. The depreciation and amortization are located on the income statement. 
  2. The current period property, plant & equipment (PP&E) is located on the balance sheet. 
  3. The prior period PP&E is located on the same balance sheet.  
  4. The formula below is how you will arrive at CapEx. 

The formula for finding a company’s capital expenditures from the income statement and balance sheet is: 

CapEx = PP&E (current period) – PP&E (prior period) + Depreciation (current period) 

The current period PP&E on the balance sheet is equal to the prior period PP&E plus capital expenditures less depreciation. 

How -Should Capital Expenditures Be Considered?

Capital expenditures are used by a company for several ratio analyses. For example, the cash-flow-to-capital expenditures ratio is tied to how a company is able to acquire long-term assets using free cash flow. It often fluctuates as a business goes through different periods of large and small capital expenditures. 

What is the Difference Between Capital and Revenue Expenditures?

Capital expenditures are not the costs of running a business on a regular basis. They are significant expenses incurred once in a while to increase or improve the fixed assets of a business. Capital expenditures are not immediately expensed in the income statement because the business derives its benefit for several years. Revenue expenditures are recurring costs that are necessary for running the day-to-day operations of the business and maintaining the existing assets. Revenue expenditures are short-term costs that are charged to the income statement as soon as they are incurred. 


Capital Expenditures  Revenue Expenditures 
The amount spent to acquire new assets or upgrade present assets. The amount spent on the day-to-day operations. 
The time span is long-term. The time span is limited or is for the current accounting period only. 
Capital expenditures are recorded in the cash flow statement.  Revenue expenditures are recorded in the income statement. 
Capital expenditures are recorded in the balance sheet under fixed assets. Revenue expenditures are not recorded on the balance sheet. 
Capital expenditures’ main purpose is to increase the current capacity.   

Revenue expenditures’ main purpose is to sustain its profitability. 


Capital expenditures are long-term in nature with no limit for expenses.  Revenue expenditures often have limits. 
Capital expenditures are not recurrent.  Revenue expenditures are recurrent expenses. 
Capital expenditures are capitalized.  Revenue expenditures are not capitalized. 
Depreciation of assets is charged.  Depreciation of assets is not charged. 

What is the Difference Between Capital and Operating Expense?

Operating expense (OpEx) is an expense that is required for the daily operation of a business. The business incurs operating expenses on a recurring basis. Operating expenses are things like insurance, payroll, and marketing. A capital expense, on the other hand, is incurred to create a benefit in the future. They are long-term and are generally used to acquire things like property, equipment, and technology. 


Capital Expenditure Operating Expenditure
For capital expenditure, throughput is whatever money is spent on the inventory. For operating expenditure, the money that is used to convert inventory into throughput. 
Capital expenses cannot be deducted during the accounting period in which they are incurred. Some capital expenses such as machinery, buildings, and other fixed assets will undergo depreciation, while non-physical assets such as patents and copies can be amortized Operating expenses can be deducted during the accounting period that they are incurred. 
Capital expenses can help with taxes because the expenses are entered as an asset for the future.  Operating expenses are taxed because the expenses are not registered as future assets, so they do not depreciate in value. 
Capital expenses are the money that is spent on buying property.   

Operating expenses are the money that is spent on maintaining the property. 

Some examples of capital expenses include machinery, vehicles, buildings, furniture, computer systems, lab apparatus, patents, etc.  Some examples of operating expenses include rent, utilities, machinery repair, worker wages, pension plans, advertising costs, accounting fees, legal expenditures, etc. 

When is it Appropriate to Record Capital Expenditure as an Asset?

Capital expenditures are recorded on the balance sheet of a company under the heading fixed assets. Capital expenditures are not recorded as an expense because of their large outlay as well as their ability to provide benefits in future periods, so they are not a part of the income statement. Capital expenditures are reported in the cash flow statement for the financial period in which they occur. 

Is Capital Expenditure Used to Acquire a Company’s Fixed Assets?

Yes. Capital expenditure is used to acquire a company’s fixed assets by purchasing, improving, or maintaining the efficiency or capacity of the company. Fixed assets are usually physical, and non-consumable assets such as property, equipment, or infrastructure. Fix assets are useful and last longer than one accounting period. 

Is Investment Considered Capital Expenditures?

Investments can be considered capital expenditures when the money is used by a business to purchase fixed assets, such as land, machinery, or buildings. These items may be purchased using cash, assets, or loans. Capital-intensive businesses require a large financial investment to start and run, whereas companies that don’t need much money to start or maintain are not capital intensive.

xosotin chelseathông tin chuyển nhượngcâu lạc bộ bóng đá arsenalbóng đá atalantabundesligacầu thủ haalandUEFAevertonxosofutebol ao vivofutemaxmulticanaisonbethttps://bsport.fithttps://onbet88.ooohttps://i9bet.bizhttps://hi88.ooohttps://okvip.athttps://f8bet.athttps://fb88.cashhttps://vn88.cashhttps://shbet.atbóng đá world cupbóng đá inter milantin juventusbenzemala ligaclb leicester cityMUman citymessi lionelsalahnapolineymarpsgronaldoserie atottenhamvalenciaAS ROMALeverkusenac milanmbappenapolinewcastleaston villaliverpoolfa cupreal madridpremier leagueAjaxbao bong da247EPLbarcelonabournemouthaff cupasean footballbên lề sân cỏbáo bóng đá mớibóng đá cúp thế giớitin bóng đá ViệtUEFAbáo bóng đá việt namHuyền thoại bóng đágiải ngoại hạng anhSeagametap chi bong da the gioitin bong da lutrận đấu hôm nayviệt nam bóng đátin nong bong daBóng đá nữthể thao 7m24h bóng đábóng đá hôm naythe thao ngoai hang anhtin nhanh bóng đáphòng thay đồ bóng đábóng đá phủikèo nhà cái onbetbóng đá lu 2thông tin phòng thay đồthe thao vuaapp đánh lô đềdudoanxosoxổ số giải đặc biệthôm nay xổ sốkèo đẹp hôm nayketquaxosokq xskqxsmnsoi cầu ba miềnsoi cau thong kesxkt hôm naythế giới xổ sốxổ số 24hxo.soxoso3mienxo so ba mienxoso dac bietxosodientoanxổ số dự đoánvé số chiều xổxoso ket quaxosokienthietxoso kq hôm nayxoso ktxổ số megaxổ số mới nhất hôm nayxoso truc tiepxoso ViệtSX3MIENxs dự đoánxs mien bac hom nayxs miên namxsmientrungxsmn thu 7con số may mắn hôm nayKQXS 3 miền Bắc Trung Nam Nhanhdự đoán xổ số 3 miềndò vé sốdu doan xo so hom nayket qua xo xoket qua xo so.vntrúng thưởng xo sokq xoso trực tiếpket qua xskqxs 247số miền nams0x0 mienbacxosobamien hôm naysố đẹp hôm naysố đẹp trực tuyếnnuôi số đẹpxo so hom quaxoso ketquaxstruc tiep hom nayxổ số kiến thiết trực tiếpxổ số kq hôm nayso xo kq trực tuyenkết quả xổ số miền bắc trực tiếpxo so miền namxổ số miền nam trực tiếptrực tiếp xổ số hôm nayket wa xsKQ XOSOxoso onlinexo so truc tiep hom nayxsttso mien bac trong ngàyKQXS3Msố so mien bacdu doan xo so onlinedu doan cau loxổ số kenokqxs vnKQXOSOKQXS hôm naytrực tiếp kết quả xổ số ba miềncap lo dep nhat hom naysoi cầu chuẩn hôm nayso ket qua xo soXem kết quả xổ số nhanh nhấtSX3MIENXSMB chủ nhậtKQXSMNkết quả mở giải trực tuyếnGiờ vàng chốt số OnlineĐánh Đề Con Gìdò số miền namdò vé số hôm nayso mo so debach thủ lô đẹp nhất hôm naycầu đề hôm naykết quả xổ số kiến thiết toàn quốccau dep 88xsmb rong bach kimket qua xs 2023dự đoán xổ số hàng ngàyBạch thủ đề miền BắcSoi Cầu MB thần tàisoi cau vip 247soi cầu tốtsoi cầu miễn phísoi cau mb vipxsmb hom nayxs vietlottxsmn hôm naycầu lô đẹpthống kê lô kép xổ số miền Bắcquay thử xsmnxổ số thần tàiQuay thử XSMTxổ số chiều nayxo so mien nam hom nayweb đánh lô đề trực tuyến uy tínKQXS hôm nayxsmb ngày hôm nayXSMT chủ nhậtxổ số Power 6/55KQXS A trúng roycao thủ chốt sốbảng xổ số đặc biệtsoi cầu 247 vipsoi cầu wap 666Soi cầu miễn phí 888 VIPSoi Cau Chuan MBđộc thủ desố miền bắcthần tài cho sốKết quả xổ số thần tàiXem trực tiếp xổ sốXIN SỐ THẦN TÀI THỔ ĐỊACầu lô số đẹplô đẹp vip 24hsoi cầu miễn phí 888xổ số kiến thiết chiều nayXSMN thứ 7 hàng tuầnKết quả Xổ số Hồ Chí Minhnhà cái xổ số Việt NamXổ Số Đại PhátXổ số mới nhất Hôm Nayso xo mb hom nayxxmb88quay thu mbXo so Minh ChinhXS Minh Ngọc trực tiếp hôm nayXSMN 88XSTDxs than taixổ số UY TIN NHẤTxs vietlott 88SOI CẦU SIÊU CHUẨNSoiCauVietlô đẹp hôm nay vipket qua so xo hom naykqxsmb 30 ngàydự đoán xổ số 3 miềnSoi cầu 3 càng chuẩn xácbạch thủ lônuoi lo chuanbắt lô chuẩn theo ngàykq xo-solô 3 càngnuôi lô đề siêu vipcầu Lô Xiên XSMBđề về bao nhiêuSoi cầu x3xổ số kiến thiết ngày hôm nayquay thử xsmttruc tiep kết quả sxmntrực tiếp miền bắckết quả xổ số chấm vnbảng xs đặc biệt năm 2023soi cau xsmbxổ số hà nội hôm naysxmtxsmt hôm nayxs truc tiep mbketqua xo so onlinekqxs onlinexo số hôm nayXS3MTin xs hôm nayxsmn thu2XSMN hom nayxổ số miền bắc trực tiếp hôm naySO XOxsmbsxmn hôm nay188betlink188 xo sosoi cầu vip 88lô tô việtsoi lô việtXS247xs ba miềnchốt lô đẹp nhất hôm naychốt số xsmbCHƠI LÔ TÔsoi cau mn hom naychốt lô chuẩndu doan sxmtdự đoán xổ số onlinerồng bạch kim chốt 3 càng miễn phí hôm naythống kê lô gan miền bắcdàn đề lôCầu Kèo Đặc Biệtchốt cầu may mắnkết quả xổ số miền bắc hômSoi cầu vàng 777thẻ bài onlinedu doan mn 888soi cầu miền nam vipsoi cầu mt vipdàn de hôm nay7 cao thủ chốt sốsoi cau mien phi 7777 cao thủ chốt số nức tiếng3 càng miền bắcrồng bạch kim 777dàn de bất bạion newsddxsmn188betw88w88789bettf88sin88suvipsunwintf88five8812betsv88vn88Top 10 nhà cái uy tínsky88iwinlucky88nhacaisin88oxbetm88vn88w88789betiwinf8betrio66rio66lucky88oxbetvn88188bet789betMay-88five88one88sin88bk88xbetoxbetMU88188BETSV88RIO66ONBET88188betM88M88SV88Jun-68Jun-88one88iwinv9betw388OXBETw388w388onbetonbetonbetonbet88onbet88onbet88onbet88onbetonbetonbetonbetqh88mu88Nhà cái uy tínpog79vp777vp777vipbetvipbetuk88uk88typhu88typhu88tk88tk88sm66sm66me88me888live8live8livesm66me88win798livesm66me88win79pog79pog79vp777vp777uk88uk88tk88tk88luck8luck8kingbet86kingbet86k188k188hr99hr99123b8xbetvnvipbetsv66zbettaisunwin-vntyphu88vn138vwinvwinvi68ee881xbetrio66zbetvn138i9betvipfi88clubcf68onbet88ee88typhu88onbetonbetkhuyenmai12bet-moblie12betmoblietaimienphi247vi68clupcf68clupvipbeti9betqh88onb123onbefsoi cầunổ hũbắn cáđá gàđá gàgame bàicasinosoi cầuxóc đĩagame bàigiải mã giấc mơbầu cuaslot gamecasinonổ hủdàn đềBắn cácasinodàn đềnổ hũtài xỉuslot gamecasinobắn cáđá gàgame bàithể thaogame bàisoi cầukqsssoi cầucờ tướngbắn cágame bàixóc đĩaAG百家乐AG百家乐AG真人AG真人爱游戏华体会华体会im体育kok体育开云体育开云体育开云体育乐鱼体育乐鱼体育欧宝体育ob体育亚博体育亚博体育亚博体育亚博体育亚博体育亚博体育开云体育开云体育棋牌棋牌沙巴体育买球平台新葡京娱乐开云体育mu88qh88