Definition of a capital expenditure

Here you will understand what is meant by capital expenditure and its definition.

Whether it is a small steel plant or a company install a computer system for information processing or a student is planning to bay moped, all the above situation involve a capital expenditure decision. Each as the above represents a scheme for investing resources which can be analyzed and appraised reasonably independently.

The definition of a capital expenditure is not necessarily synonymous with how a capital expenditure is defined in accounting. A capital expenditure, from the accounting point of view is an expenditure which is shown as an asset in the balance sheet. This asset ,except in the of a non- depreciable asset like land ,is depreciated over its life in accounting, the classification of an expenditure as a capital expenditure or a revenue expenditure is governed by certain convention, by some provision of low and by the managements desire to enhance or depress reported profits . Outlays on research and development, major advertising campaigns and reconditioning of plant and machinery may be treated as revenue expenditure for accounting process, even though they are expected to generate a steam of benefits in feature and, their for, qualify for being capital expenditures as per definition.