Capital expenditures (CAPEX or capex) are expenditures creating future benefits. A capital expenditure is incurred when a business spends money either to buy fixed assets or to add to the value of an existing fixed asset with a useful life that extends beyond the taxable year. Capex are used by a company to acquire or
upgradephysical assetssuch as equipment, property, or industrial buildings. In accounting, a capital expenditure is added to an asset account ("capitalized"), thus increasing the asset's basis (the cost or value of an asset as adjusted for tax purposes). Capex is commonly found on the Cash Flow Statement as "Investment in Plant Property and Equipment" or something similar in the Investing subsection.
For tax purposes, capital expenditures are costs that cannot be deducted in the year in which they are paid or incurred, and must be capitalized. The general rule is that if the property acquired has a useful life longer than the taxable year, the cost must be capitalized. The capital expenditure costs are then amortized or depreciated over the life of the asset in question. As stated above, capital expenditures create or add basis to the asset or property, which once adjusted, will determine tax liability in the event of sale or transfer. In the US, Internal Revenue Code §§263 and 263A deal extensively with capitalization requirements and exceptions. [Donaldson, Samuel A. Federal Income Taxation Of Individuals: Cases, Problems and Materials (2nd ed.). St. Paul: Thomson West, 2007. pg. 173 ]
Included in capital expenditures are amounts spent on:
# acquiring fixed assets
# fixing problems with an asset that existed prior to acquisition
# preparing an asset to be used in business
# legal costs of establishing or maintaining one's right of ownership in a piece of property
# restoring property or adapting it to a new or different use
# starting a new business
An ongoing question of the accounting of any company is whether certain expenses should be "capitalized" or "expensed". Costs that are expensed in a particular month simply appear on the
financial statementas a cost that was incurred that month. Costs that are capitalized, however, are amortized over multiple years. Capitalized expenditures show up on the balance sheet. Most ordinary business expenses are clearly either expensable or capitalizable, but some expenses could be treated either way, according to the preference of the company.
The counterpart of capital expenditure is operational expenditure ("OpEx").
*Operational expenditure (OPEX)
Cash flow statement
* [http://www.investopedia.com/terms/c/capitalexpenditure.asp Capital Expenditure — CAPEX]
Wikimedia Foundation. 2010.
Look at other dictionaries:
capital expenditure — n: an amount paid out that creates a long term benefit (as one lasting beyond the taxable year); esp: costs that are incurred in the acquisition or improvement of property (as capital assets) or that are otherwise chargeable to a capital account… … Law dictionary
capital expenditure — Expenditure on the company s long term asset. Financial Services Glossary * * * capital expenditure capital expenditure ➔ expenditure * * * Payment for the acquisition of a long term asset. Often known simply as Capex. * * * capital… … Financial and business terms
capital expenditure — capital costs; = capital investment; = investment costs; = investment expenditure The expenditure by an organization of an appreciable sum for the purchase or improvement of a fixed asset; the amount expended would warrant the item being… … Accounting dictionary
capital expenditure — capital costs; capital investment; investment costs; investment expenditure The expenditure by an organization of a significant amount for the purchase or improvement of a fixed asset; the amount expended would warrant the item being depreciated… … Big dictionary of business and management
capital expenditure — n. money spent for replacing and improving business facilities, not for operating expenses … English World dictionary
capital expenditure — noun the cost of long term improvements • Hypernyms: ↑cost * * * noun : an expenditure for long term additions or betterments properly chargeable to a capital assets account * * * Accounting, Finance. an addition to the value of fixed assets, as… … Useful english dictionary
capital expenditure — kapitalo išlaidos statusas T sritis Gynyba apibrėžtis Įsigyto ilgalaikio turto piniginė vertė. atitikmenys: angl. capital expenditure ryšiai: susijęs terminas – NATO saugumo investicijų programa šaltinis NATO mokymų ir pratybų finansavimo terminų … Lithuanian dictionary (lietuvių žodynas)
capital expenditure — capital ex penditure noun uncount BUSINESS money that a company spends on things such as equipment and buildings that it needs to operate as a business … Usage of the words and phrases in modern English
capital expenditure — Payments by a business for basic assets such as property, fixtures or machinery, but not for day to day operations such as payroll, inventory, maintenance and advertising. Such expenditure is intended to increase the value of the company,… … Business law dictionary
capital expenditure — The purchase or *betterment of *long term assets like *property, plant, and equipment. The term is often abbreviated to capex. Contrast *revenue expenditure … Auditor's dictionary