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Capital expenditure, or CapEx, are funds used by a company to acquire or upgrade physical assets such as property, industrial buildings or equipment. It is often used to undertake new projects or investments by the firm.
Capital expenditures ( CAPEX) are the funds that a business uses to purchase major physical goods or services to expand the company's abilities to generate profits. These purchases can include hardware (such as printers or computers), vehicles to transport goods, or the purchase or construction of a new building. The type of industry a company is involved in largely determines the nature of its capital expenditures. The asset purchased may be a new asset or something that improves the productive life of a previously purchased asset. If the asset's useful life extends more than a year, then the company must capitalize the expense, using depreciation to spread the cost of the asset over its designated useful life as determined by tax regulations. Capital expenses are most often depreciated over a five- to-year period but may be depreciated over more than two decades in the case of real estate.
An operating expense results from the ongoing costs a company pays to run its basic business. In contrast to capital expenditures, operating expenses are fully tax-deductible in the year they are made. As operational expenses make up the bulk of a company's regular costs, management examines ways to lower operating expenses without causing a critical drop in quality or production output. Sometimes an item that would ordinarily be obtained through capital expenditure can have its cost assigned to operating expenses if a company chooses to lease the item rather than purchase it. This can be a financially attractive option if the company has limited cash flow and wants to be able to deduct the total item cost for the year.
Because capital expenditures are major purchases, and their costs can only be recovered over time through depreciation, companies ordinarily budget for these purchases separately from preparing an operational budget.
Agree with Mr. Mohammed Ashraf answer.Thank you
Capital expenditure, it is the best practice to plan for future projects or business continunity by concidering the equipments' replacement life cycle or new business needs.
Agree with Mr. Mohammed Ashraf
thanks & regards
Capital expenditure or capital expense ("capex") is an expense where the benefit continues over a long period, rather than being exhausted in a short period. Such expenditure is of a non-recurring nature and results in acquisition of permanent assets. It is thus distinct from a recurring expense.
Capex are capital expenditure. Capital expenditure means expenses before any asset is available for operational use. Capex depends on strategic vision of the organisation. This can be relevant to acquiring new asset/ machinery/ property and some times intangible asset as well. This can also be an improvement/extension/renovation/ capacity increase of an existing asset or property.
There are certain rules and IFRS which are required to follow for computing or capitalising the asset. The cost of funds (interest etc.) are also part of capex till the asset is ready for use in operations.
Interest after the asset is ready for use is part of Finance cost in the statement of Profit and Loss.
The asset acquired by capex - (Cost) is generally claimed as depreciation or amortisation over the useful period of the asset. The relevant Tax law might have different wear and tear rates and this difference will lead to have deferred tax asset or liability in the books.
We need to plan our cash flow properly so working capital is not utilised in capex- giving a cash crunch in the organisation.
capital expenditure, teh amount of money invested in acquiring fixed assets
A capital expenditure is an amount spent to acquire or improve a long-term asset such as equipment or buildings. Usually the cost is recorded in an account classified as Property, Plant and Equipment. The cost (except for the cost of land) will then be charged to depreciation expense over the useful life of the asset
CAPEX in capital expenditure. Money used to acquire or construct an asset.
"CAPEX" Capital Expenditure - Capital expenditure, or CapEx, are funds used by a company to acquire or upgrade physical assets such as property, industrial buildings or equipment. It is often used to undertake new projects or investments by the firm. This type of outlay is also made by companies to maintain or increase the scope of their operations. These expenditures can include everything from repairing a roof to building, to purchasing a piece of equipment, or building a brand new factory.
