Capital expenditures are expenditures creating future benefits for the business incurred when a business spends money either to buy fixed assets or to add to the value of an existing fixed asset with a useful life extending beyond the taxable year.

CAPEX is used by a company to acquire or upgrade physical assets such as equipment, property, or industrial buildings. In accounting, a capital expenditure is added to an asset account (“capitalized”), thus increasing the asset’s basis (the cost or value of an asset adjusted for tax purposes

Examples of capital expenditures are amounts spent on:

1. acquiring fixed, and in some cases, intangible assets
2. repairing an existing asset so as to improve its useful life
3. upgrading an existing asset if its results in a superior fixture
4. preparing an asset to be used in business
5. restoring property or adapting it to a new or different use
6. starting or acquiring a new business

So it’s vital to place funds aside for it from the companies trading profit to ensure the business can continue to grow

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