Capital Expenditure CapEx
Definition: Increases asset value or life
Scope:BroadDifficulty:Easy
Increases asset value or life
Common Journal Entries
| Account | Debit | Credit |
|---|---|---|
| 1. Purchase new equipment | ||
| Buy $45,000 machine (capitalized). | ||
| EquipmentAsset+ | $45,000 | |
| CashAsset− | $45,000 | |
| Capital expenditure—asset with multi-year benefit. | ||
| 2. Major improvement | ||
| Add $15,000 upgrade extending useful life. | ||
| EquipmentAsset+ | $15,000 | |
| CashAsset− | $15,000 | |
| Capitalized, not expensed. Contrast with routine repair. | ||
T-AccountsA visual representation of a ledger account shaped like the letter T. Left side shows debits, right side shows credits.
EquipmentEquipmentAssetA resource owned by the business. Normal balance: debit. Debits increase, credits decrease.
DebitLeft side of a journal entry. Increases assets and expenses. Decreases liabilities, equity, and revenue.
$45,000.00
$15,000.00
◀ Normal bal.
CreditRight side of a journal entry. Increases liabilities, equity, and revenue. Decreases assets and expenses.
$60,000.00
CashAsset account. Debits increase the balance. Credits decrease the balance.AssetA resource owned by the business. Normal balance: debit. Debits increase, credits decrease.
DebitLeft side of a journal entry. Increases assets and expenses. Decreases liabilities, equity, and revenue.
◀ Normal bal.
CreditRight side of a journal entry. Increases liabilities, equity, and revenue. Decreases assets and expenses.
$45,000.00
$15,000.00
$60,000.00
DurationLong-Term
Related Reports
- Statement of Cash Flows (Report)(Primary — Investing activities)
External Links
- Capital expenditure — Wikipedia