An acronym for Capital Expenses, CapEx refers to business costs associated with acquiring, developing or upgrading physical assets such as hardware systems or intangible assets like patents and other intellectual property.
Capital expenditures stand in contrast to operating expenditures, or OpEx, which are the ongoing costs associated with the daily operations of business products, services and/or systems.
CapEx from an Accounting Perspective
From an accounting perspective, CapEx or capital expenditures refer to business costs allocated to creating future benefits, such as acquiring new fixed assets or upgrading existing ones.
The monetary benefits from CapEx costs are expected to extend beyond the current tax year, and as a result, CapEx costs typically need to be accounted for on income statements with depreciation (tangible assets) or amortization (intangible assets such as patents or other intellectual property) factored into the equation.
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