Describe the term Capital expenses

Question

Describe the term Capital expenses. Also write down its formula.

Answer 1

Capital expenses are the portion of total expenditures of company that are employed for buying the fixed assets. After buying such assets, company utilizes them for production or other future advantages. All capital expenditures are illustrated in fixed assets of company's balance sheet. Such capital expenditures are also illustrated as investment in plant property and other fixed assets in the cash flow statement. We never show such expenditures in gain and loss account of company. We only display the depreciation of fixed assets that we buy via such expenditures.

Total capital expenditures = purchase price of fixed assets + expenditures for starting new business + new acquisition of assets