- It is expenditure which results in the acquisition of fixed assets or an improvement in their earning capacity.
- Capital expenditure is not charged as an expense in the income statement at one go but rather a depreciation or amortization charge will usually be made to write off the capital expenditure gradually over time.
- Capital expenditure on fixed assets is the recognition of a fixed asset (e.g. vehicles, Land and Building) in the statement of financial position of the business.
- Is expenditure which is incurred for either: For the purpose of the trade/service of the business.
- This includes Selling & Distribution expenses, administration expenses and finance charges.
- To maintain the existing earning capacity on fixed Assets ( such as repair expenses)
- To ensure smooth running of the day to day activities of the company/Business.