What is a capital expenditure versus a revenue expenditure?

Definition of Capital Expenditure

A capital expenditure is an amount spent to acquire or significantly improve the capacity or capabilities of a long-term asset such as equipment or buildings. Usually the cost is recorded in a balance sheet account that is reported under the heading of Property, Plant and Equipment. The asset's cost (except for the cost of land) will then be allocated to depreciation expense over the useful life of the asset. The amount of each period's depreciation expense is also credited to the contra-asset account Accumulated Depreciation.

Examples of Capital Expenditures

Examples of capital expenditures include the amounts spent to acquire or significantly improve assets such as land, buildings, equipment, furnishings, fixtures, vehicles. The total amount spent on capital expenditures during an accounting year is reported under investment activities on the statement of cash flows.

Definition of Revenue Expenditure

A revenue expenditure is an amount that is spent for an expense that will be matched immediately with the revenues reported on the current period's income statement.

Examples of Revenue Expenditures

Examples of revenue expenditures include the amounts spent on repairs and maintenance, selling, general and administrative expenses.

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