CAPITAL EXPENDITURE Basic Accounting 

presentation

Presented by : Sukhmandeep singh  Presented to : Aishwarya Khurana

                              :  2233409                               ( Assistant Professor )
                                ( BBA 1A )

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What is Capital Expenditures(CapEx)?

• Capital expenditures are funds used by a company 

• to acquire, upgrade and maintain physical assets 
• such as property, plants, buildings,
•  technology or equipment

• They are recorded or capitalized on a company’s

balance sheet instead of expensed on the
income statement.​

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Classification of capital expenditure
• Expenditure is incurred on the new plant and machinery.

• Incurred for maintaining normal business operation.

•   Incurred for research work.​​

•   Incurred for business development.​

• Incurred indirectly for production. 

•   Incurred
for innovation.  ​
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Types of Capital Expenditures
• Buildings and property
• Upgrades to equipment
• Software Upgrades
• Computer Equipment
• Vehicles
• Intangible Assets

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 Special Considerations
• Capital Expenditures that are poorly planned 
      or executed can also lead to financial problems
      in the future.
• For example, if a company’s management team 
• buys new technology that quickly 
• becomes obsolete,the company may be stuck with the debt 
• payments for many years without much revenue generated
      from the asset.

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Real World Example of Capital Expenditures 
Below is an example of the cash flow statement for
Tesla Inc. for years ending 2019,2020,2021,from the
company’s annual report.

• Tesla listed purchases of property and equipment 

• for $6.5 billion,$3.2 billion,$1.3 billion in
2021,2020,2019 respectively.
• Purchase of solar energy systems for $32 million
•  in 2021,$75 million in 2020, and $105 million in 2019.
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 Formula
Cap Ex=Δ PP&E+Current Depreciation

Where :Cap Ex=Capital expenditures

ΔPP&E=Change in property, plant, and equipment 
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 Bottom Line
• Companies often incur capital expenditures
      to invest in their long-term capabilities.

•     If an asset is likely to deliver long-term benefits to  a company,

   the company may be required to record the purchase
    or development as a capital expenditure, ​
•   depreciate the asset over its useful life, and
maintain ​
    part of the purchase on its balance sheet. ​​

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 THANKYOU

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 It increases the production capability
and revenue potential.

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