Capital Expenditures are those expenditures that are incurred to acquire fixed assets or to increase or to add value to an existing fixed asset. Fixed assets include both tangible as well as intangible assets. These assets are not meant for the purpose of resale and are used in the business to generate revenues. Capital expenditure is not incurred on regular basis and the amount of this expenditure is relatively higher than the revenue expenditure. The capital expenditure results in an income or benefits for a longer period that extends for a period of more than a year. This expenditure is shown in the Balance Sheet on the Assets side. Some of the examples of capital expenditure are the purchase of plants, furniture, vehicles, goodwill, wages paid for the extension of land, wages paid for constructing additional rooms in a building, etc.
Examples of Capital Expenditure
Some examples of capital expenditure are as follows:
a) When a fixed asset is acquired by the firm like furniture, machinery, land & building, motor vehicles, etc.
b) When expenditure is incurred on making a fixed asset operational like installation charges on the machinery, freight, and carriage paid on the fixed asset, etc.
c) When any modification is made to an existing fixed asset like adding a floor to the building or construction of offices, etc.
d) When an intangible asset is purchased like patents, trademarks, copyrights, Goodwill, etc.
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