Capital expenditure

Expenses on fixed assets and expenses paid to get financial benefits which will last more than 12 months.

Capital expenditures include:
  • Purchase of fixed assets e.g. plant, machinery, building, land etc 
  • Improvement of fixed assets e.g. enhancement of plant's capacity, addition in machinery that will provide financial benefits for more than 1 year etc. Remember that repair and renewal expenses of fixed asset generally incur every year therefore these expenses should not be included in capital expenditures 
  • Initial expenses of a new company. For example preliminary expenses of company and brokerage or commission expenses for the sale of new company shares and other stock 
  • Expenses for the long run increase in sales or earnings 
  • Expenses incurred on shifting equipments, machineries, and other stock to another location where a firm can earn more revenue 
  • Amount paid for acquiring non-current intangible assets. For example funds used for getting copy rights, patents, good will of an entity etc 
  • Funds spent on research and development of new products