Capital Expenditure (CAPEX)
What is capital expenditure?
Capital Expenditure, also known as CAPEX, covers cash reserves used by a company to gain or advance a physical asset such as real estate or equipment. This can cover the building of a new warehouse, buying tools or fixing a decaying wall.
Where have you heard about capital expenditure?
CAPEX is most commonly used by a company when they are taking on new projects, for example the expansion of a particular site. It can also be used to maintain or advance the project management of procedures.
What you need to know about capital expenditure.
CAPEX funds and their amount depend mainly on the type of industry that the company occupy. When it comes to accounting, an expense becomes capital expenditure when an investment upgrades and improves the life of an existing capital asset. When a particular expense is defined as capital expenditure, it needs to be capitalised and the company must spread the fixed cost over the life of said asset.