What is the difference between a capital expenditure and a revenue expenditure?
A capital expenditure is an expense that is “capitalized,” meaning that the cost (expense) will benefit several future accounting periods. Examples of capital expenditures include buying a fixed asset, buying an addition to a fixed asset, or buying a new part that will increase the operating efficiency of a fixed asset. This type of expenditure is recorded as a debit to a fixed asset account. A certain amount of the capital expenditure will be written off each year as an expense and matched against revenue (the process of depreciating fixed assets). A revenue expenditure is an expenditure that benefits only the current accounting period and is recorded as a debit to an expense account. They are called revenue expenditures because they are matched against current revenues. Expenses as we have known them in the past have been revenue expenditures.
