Home > Accounting Glossary > Capital Expenditure
Capital Expenditure: Definition and Meaning
Definition
A capital expenditure is money spent to acquire, improve, or extend the useful life of a long-term asset.
Why It Matters
Capital expenditures are important to cash-flow planning because they often require significant cash, financing, or lease commitments. They may be recorded as assets and depreciated or amortized over time rather than being treated as immediate operating expenses.
Whether a cost should be capitalized or expensed depends on the facts, the nature of the work performed, the company’s accounting policy, and applicable tax and financial-reporting rules.
Example
Replacing a company vehicle fleet or purchasing major machinery may be treated as a capital expenditure.
Related Terms
TYS provides accounting, tax, construction-accounting, and business-advisory support to closely held businesses, contractors, individuals, and families. With offices in Fairport, New York, and Walnut Creek, California, TYS helps clients better understand their financial information and prepare for important decisions.
Have a question about Capital Expenditure or your business’s financial reporting?
Contact TYSThe information on this page is provided for general educational purposes only and is not accounting, tax, legal, financial, insurance, bonding, or business advice. Consult qualified professionals regarding your particular circumstances.
Back to the Accounting Glossary →