Capital expenditures refer to funds that are used by a company for the purchase, IMPROVEMENT, or maintenance of long-term assets to improve the efficiency or CAPACITY of the company. Long-term assets are usually physical, fixed and non-consumable assets such as property, equipment, or infrastructure, and that have a useful life of more than one ACCOUNTING period.

Also known as CapEx or capital expenses, capital expenditures include the purchase of items such as new equipment, machinery, land, plant, buildings or warehouses, FURNITURE and fixtures, business vehicles, software, or intangible assets such as a patent or license.

There are normally two forms of capital expenditures: (1) expenses to maintain levels of operation present within the company and (2) expenses that will enable an increase in future GROWTH. A capital expense can either be tangible, such as a machine, or intangible, such as a patent. Both intangible and tangible capital expenditures are usually considered assets since they can be sold when there is a need.

It is important to note that funds spent on repair or in conducting continuing, normal maintenance on assets is not considered capital expenditure and should be expensed on the income statement whenever it is incurred as repair and maintenance expense