Capital expenditure

Capital expenditure or capital expense (abbreviated capex, CAPEX, or CapEx) is the money an organization or corporate entity spends to buy, maintain, or improve its fixed assets, such as buildings, vehicles, equipment, or land.[1][2] It is considered a capital expenditure when the asset is newly purchased or when money is used towards extending the useful life of an existing asset, such as repairing the roof.[3]

Capital expenditures contrast with operating expenses (opex), which are ongoing expenses that are inherent to the operation of the asset. Opex includes items like electricity or cleaning. The difference between opex and capex may not be immediately obvious for some expenses; for instance, repaving the parking lot may be thought of inherent to the operation of a shopping mall. Similarly, the costs of software for a business (either software development or software as a service licensing) might fall into either opex or capex (that is, is it merely business as usual, or is it something new, an investment with multiyear return?). The dividing line for items like these is that the expense is considered capex if the financial benefit of the expenditure extends beyond the current fiscal year.[4]

  1. ^ "capital expenditure (capex)". BusinessDictionary. Archived from the original on 11 April 2018. Retrieved 11 July 2017.
  2. ^ "What is a Capital Expenditure (CAPEX)?". My Accounting Course. Retrieved 11 July 2017.
  3. ^ Cite error: The named reference investopedia was invoked but never defined (see the help page).
  4. ^ "What is CapEx and OpEx?". 22 June 2021.

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