Capital Expenditures

Capital Expenditures as a separate line item on a financial statement are important, as investors in a company are interested in the amount of capital improvements are being made to itself. Investors should be cautious of declining or absent capital expenditures, as well as extraordinarily large values. Explanations as to why these values are what they are should be found in the company's financial reporting.

Recording valid entries as Capital Expenditures has benefits for the company as well. Depending on the category of asset purchased, the company will record the Depreciation and Amortization of these assets over a number of years.

Some example of Capital Expenditures include new production equipment for a manufacturing company, a new commercial HVAC system in an office building, and the purchase of a neighboring warehouse. These are all examples of Capital Expenditures because as these assets have real value, plus are expected to last more than a year.

New assets purchased by a company are not always considered a Capital Expenditure. For example, building maintenance supplies and parts for an entire office building might also have a significant cost, but these supplies do not usually benefit the company for more than a year, and would be expected to record these expenses as maintenance expense.