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Tuesday, April 10, 2012

CAPITAL EXPENDITURE



Capital expenditure is the money spent to upgrade or acquire tangible assets such as buildings, machinery, furniture, computer equipments etc. with a useful life extending beyond a taxable year. It is also called capital expense or capital spending. Purchasing a car is an example of capital spending.

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.

1 comment:

  1. Thanks for making things clear. This topic gives me headaches for quite sometime already. I am really glad you shared this information.
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