What are the different types of capital expenditure?

Purchases of fixed assets and purchases made to upgrade fixed assets are two different types of capital expenditure (CAPEX). Fixed assets are physical characteristics with a lifetime that exceeds the current year. This property must also be a certain nature to qualify as a fixed asset rather than the current asset. The physical characteristics considered to be fixed property must have the quality of stability, such as the property or the main machinery, rather than something that can have a lifetime for many years, but it easily moves or sells like a computer printer. Categories with fixed assets are commonly referred to as property, plant and equipment (PP & E). The assets that the company acquires during the fiscal year can be considered current or fixed, which affects how the asset is treated for tax purposes. The asset is considered to be up to date when used in the current or subsequent anor or can be easily converted to cash. The cost of obtaining a current asset is written in the books of a companyThose in the year when the asset is obtained.

A solid asset is a property that has a long life and cannot be easily sold or converted to cash. This type of property cannot be in the year when it is obtained. The Tax Code requires that the costs of fixed assets be amortized for its lifetime, which means that the entire price must be extended over the years when the property will be used and the same part is deducted every year. The assets depreciate every year, which is another cost that the company must record in its accounting system.

Capital expenditure is money spent on PP & E. There are two types of cash expenditure that will qualify costs such as capital for tax purposes. If the company buys something that is considered a fixed asset, the costs are capital expenditure. Expenditure of the modernization of a fixed asset or extending its life is also considered capital. Any expenses of money to obtainInstead, the current assets are considered to be OPEX (OPEX).

The importance of the classification of capital expenditure is primarily related to tax treatment, but also has other consequences for the financial operations of the company. Businesses operate according to the annual budget and operating budgets manage cash flow during the fiscal year. Fixed assets are transmitted separately to the capital budget, which reflects only capital expenses. The purchase or development of PP & E usually requires large cash expenses, comprehensive financing and a acquisition plan that takes several years that requires management to identify assets in advance so that it can be properly taken into account in the company's financial plan.