Capital expenditure

Capital expenditure

It is an expenditure incurred during an accounting period, the benefits of which will be available for more than one accounting period. It includes any expenditure resulting in the acquisition of any fixed asset or contributes to the revenue earning capacity of the business. It is non- recurring in nature.

Features of capital expenditure

Following are the features of capital expenditure:

·           It gives benefit for more than one accounting period.

·           It includes acquisition of fixed assets and all expenditure incurred upto the point an asset is ready for use.

·           It contributes to the revenue earning capacity of the business.

·           It is non-recurring in nature.

·           It is shown on the assets side of the balance sheet.

Examples

·           Cost of acquisition of land and building.

·           Cost of acquisition of office equipment, computer and air-conditioner.

·           Cost of acquisition of plant and machinery including installation charges and trial run.