According to William Pickles “Outlay resulting in the increase or acquisition of an asset or increase in the earning capacity of the business are capital expenses.”
image source: blog.theliteracysite.com/wp-content/uploads/2015/03/shutterstock_245706847.jpg
Capital expenses may be of following types:
- Expenses incurred on the acquisition of an asset of a comparatively permanent nature, which is held for carrying on business e.g. Land, Building, Machinery, Furniture etc.
- All expenses incurred on an existing asset by way of alteration, extension and modernization or improvement is a capital expenditure.