Capital Expenditure - SS3 Accounting Lesson Note

Capital expenditures are expenses incurred by a company to acquire or improve long-term assets, such as buildings, equipment, or land. These assets are typically expected to provide benefits to the company for more than one accounting period.

Examples of capital expenditures include the purchase of a new manufacturing facility, the construction of a new office building, the purchase of new machinery, or the renovation of an existing building. Capital expenditures are generally significant in size and require a large amount of cash or financing to be made.

Unlike revenue expenditures, which are typically expensed immediately, capital expenditures are usually recorded on a company's balance sheet and are depreciated over their useful life. Depreciation is the process of allocating the cost of a long-term asset over its useful life, as the asset is used up or becomes obsolete.

Capital expenditures are important for a company's growth and future success. By investing in long-term assets, companies can improve their productivity, efficiency, and competitiveness.