Capital and Revenue Expenditures FAQs What is the difference between capital and revenue expenditure? Capital expenditures represent money spent to purchase, improve, or extend the life of a long-term asset. Revenue expenditures are incurred in the normal course of business for supplies, repairs, and other operating costs that do not add value to an asset. When should capital expenditure be accounted for? Capital expenditure should be recorded as an asset on the balance sheet when it meets certain criteria such as having a useful life of more than one year and being something that can depreciate over time. How are capital and revenue expenditure treated differently by businesses? Businesses often treat capital expenditures differently than revenue expenditures, as the former are considered investments into the business that may yield future benefits. Revenue expenditures, on the other hand, do not result in long-term benefits and are treated as operating expenses. What is capitalization of expenditure? Capitalization of expenditure is the process of converting an expense to an asset by recording it as capitalized cost on the balance sheet instead of expensing it immediately. This allows businesses to spread out costs associated with significant purchases over time rather than having to pay for them all upfront. What are some examples of capital expenditure? Examples of capital expenditure include purchasing or improving the property, buying new equipment or technology, and investing in research and development. About the Author True Tamplin, BSc, CEPF® Facebook Linkedin Instagram Twitter Youtube True Tamplin is a published author, public speaker, CEO of UpDigital, and founder of Finance Strategists. True is a Certified Educator in Personal Finance (CEPF®), author of The Handy Financial Ratios Guide, a member of the Society for Advancing Business Editing and Writing, contributes to his financial education site, Finance Strategists, and has spoken to various financial communities such as the CFA Institute, as well as university students like his Alma mater, Biola University, where he received a bachelor of science in business and data analytics. To learn more about True, visit his personal website or view his author profiles on Amazon, Nasdaq and Forbes.