Define capital expenditures

Question

Briefly describe the term capital expenditures? Is it okay to consider such expenditures while evaluating the profitability of throughout a certain period?

Answer 1

Capital Expenditure is an amount incurred for obtaining the long term assets like building, land, equipments that are constantly employed for the reason of earning revenue. These are not preordained for sale. These costs are recorded in accounts specifically Plant, Property, Equipment. Advantages from this expenditure are spread over numerous accounting years.

No, Capital expenditure must not be considered while evaluating profitability as profits incurred from the capital expenditure are long term profits and can’t be appeared in the same financial years in that they were paid for. They require to be spread over a number of years to describe the accurate position in balance sheet and profit and loss account.