What do you mean by Capital Expenditure?

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.”

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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.
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