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 upgrade physical assets such 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. Look up acquisition in Wiktionary, the free dictionary. ... Look up Upgrade on Wiktionary, the free dictionary Upgrading is the process of replacing an older thing with a newer thing. ... In business and accounting an asset is anything owned, whether in possession or by right to take possession, by a person or a group acting together, e. ... This page discusses common devices known as tools, for other meanings see Tool (disambiguation) Modern hammer A tool is, among other things, a device that provides a mechanical or mental advantage in accomplishing a task. ... This article or section does not cite any references or sources. ... It has been suggested that Accounting scholarship be merged into this article or section. ...

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.^[1]

Included in capital expenditures are amounts spent on:

1. acquiring fixed assets
2. bringing them into business
3. legal costs of buying buildings
4. carriage inwards on machinery bought
5. any other cost needed to make a fixed asset ready for use.

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 statement as 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. Fixed asset, also known as property, plant, and equipment (PP&E), is a term used in accountancy for assets and property which cannot easily be converted into cash. ... Financial statements (or financial reports) are a record of a business financial flows and levels. ... For other uses of Amortization, see the Amortization disambiguation page. ...

The counterpart of capital expenditure is operational expenditure ("OpEx"). In throughput accounting, the cost accounting aspect of Theory of Constraints (TOC), operating expense is the money spent turning inventory into throughput. ...

See also

• Operational expenditure (OPEX)
• Cash flow statement
• Income statement
• Balance Sheet
• Expense
• Amortization/Depreciation
• Gross fixed capital formation
• Expenses versus Capital Expenditures

Aggregate demand expenditure equals real GDP. In throughput accounting, the cost accounting aspect of Theory of Constraints (TOC), operating expense is the money spent turning inventory into throughput. ... In financial accounting, a cash flow statement is a financial statement that shows a companys incoming and outgoing money (sources and uses of cash) during a time period (often monthly or quarterly). ... An Income Statement, also called a Profit and Loss Statement (P&L), is a financial statement for companies that indicates how Revenue (money received from the sale of products and services before expenses are taken out, also known as the top line) is transformed into net income (the result after... This article needs additional references or sources for verification. ... In accounting, an expense represents an event in which an asset is used up or a liability is incurred. ... Amortization may refer to: Amortization (business), the allocation of a lump sum amount to different time periods. ... Declining-balance depreciation of a $50,000 asset with $6,500 salvage value over 20 years. ... Gross fixed capital formation (GFCF) is a macroeconomic concept used in official national accounts since the 1930s. ... Under United States income tax law, to make a deduction in the current taxable year, a taxpayer must be able to show that a particular cost is a business expense[1] (but not an expense related to personal activities)[2] and not a capital expenditure. ...

External links

• Capital Expenditure — CAPEX

References

1. ^ Donaldson, Samuel A. Federal Income Taxation Of Individuals: Cases, Problems and Materials (2nd ed.). St. Paul: Thomson West, 2007. pg. 173