Capital Expenditure (CapEx)
Definition
Spending to acquire or improve a long-lived asset, capitalised on the balance sheet and then depreciated over its useful life rather than expensed at once. Buying a delivery van is capital expenditure; fuelling it is an operating expense.
Related Terms in Core Accounting
Operating Expense (OpEx)
The day-to-day cost of running the business, charged against profit in the period it is incurred: rent, salaries, software subscriptions, utilities and professional fees. Contrasted with capital expenditure, which is capitalised and depreciated.
Prepaid Expenses
Amounts paid in advance for goods or services the business has not yet consumed, carried as a current asset and released to expense as the benefit is used. Annual insurance premiums, software licences and advance rent are the usual cases.
Deferred Revenue
Cash collected from a customer before the goods or services have been delivered, held as a liability until the obligation is met. Standard for subscriptions, annual plans and deposits. Recognised as revenue progressively as delivery occurs.
Unearned Revenue
Another name for deferred revenue: a customer payment received in advance of performance, carried as a liability because the business still owes the goods or services. It becomes revenue only once the obligation is satisfied.
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