A capital expenditure is an amount spent to acquire or
improve a long-term asset such as equipment or buildings. Usually the cost is
recorded in an account classified as Property, Plant and Equipment. The cost
(except for the cost of land) will then be charged to depreciation expense over
the useful life of the asset.
A revenue expenditure is an amount that is expensed
immediately—thereby being matched with revenues of the current accounting
period. Routine repairs are revenue expenditures because they are charged
directly to an account such as Repairs and Maintenance Expense. Even
significant repairs that do not extend the life of the asset or do not improve
the asset (the repairs merely return the asset back to its previous condition)
are revenue expenditures.
