Capital expenditure, also called CAPEX, are funds used by a company to acquire or upgrade long-term physical assets such as property, industrial buildings, or equipment. It is a measure of new projects or investments by a company. This type of expense is made by companies to maintain or increase the scope of their operations.
Usually a CAPEX 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.
Examples of common types of CAPEX spending include: upgrades to manufacturing equipment, the purchase of a building or property, costs to upgrade or purchase software, computer equipment purchases like servers, laptops, and desktop computers, and vehicles for industries that make heavy use of vehicles to conduct business.<< Back to Glossary Index