Examples of capital expenditures

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What is a Capital Expenditure?

A capital expenditure refers to the expenditure of funds for an asset that is expected to provide utility to a business for more than one reporting period. These investments are needed to build an asset base for a business that allows it to house employees, as well as conduct research and build goods and services for its customers. The intention behind these expenditures is to build a competitive advantage that exceeds the capabilities of the competition.

Examples of Capital Expenditures

Examples of capital expenditures are as follows:

  • Buildings. Includes new office buildings, warehouses, and production facilities, including subsequent costs that extend the useful life of a building.

  • Energy efficiency projects. Includes the cost of solar panels, wind turbines, and other green technologies.

  • Furniture and fixtures. Includes office furniture, desks, chairs, and storage units.

  • Infrastructure. Includes the cost of roads, bridges, tunnels, and electrical systems.

  • Intangible assets. Includes the cost to acquire patents, licenses, franchises, and other types of intellectual property.

  • Land. Includes the cost of upgrading the land, such as the cost of an irrigation system or a parking lot.

  • Machinery. Includes buying new machinery, upgrading existing equipment, and the costs required to bring the equipment to its intended location and for its intended use.

  • Office equipment. Includes copiers and scanning equipment.

  • Research and development facilities. Includes the cost to construct labs and buy specialized research equipment.

  • Technology. Including computer equipment, servers, IT infrastructure, and software.

  • Vehicles. Includes delivery trucks, construction vehicles, and other business vehicles.

Related AccountingTools Courses

Capital Budgeting

Fixed Asset Accounting

How to Audit Fixed Assets

When to Record an Expenditure as an Expense

An expenditure is recorded as an expense if the expenditure is for an amount less than the designated capitalization limit of a business. The capitalization limit is established to keep a company from wasting time tracking assets that have little value, such as computer keyboards. Alternatively, an expenditure is recorded as an expense when the expenditure relates to an item that is expected to be fully consumed within the current reporting period.