All 34 Capital Budgeting questions
More in Capital Budgeting
What is capital budgeting? What is the payback period and how is it calculated? What is the accounting rate of return (ARR)? What is the profitability index (PI)? Why is the initial investment treated as a time-zero cash outflow? What are the advantages and disadvantages of the payback method? What is a hurdle rate? What is the difference between mutually exclusive and independent projects? What is the difference between a screening and a preference decision? What is the time value of money and why does it matter in capital budgeting?
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Budgeting & Forecasting › Capital Budgeting

What is the difference between capital and revenue expenditure in budgeting?

Beginner

Answer

Capital expenditure buys or improves long-term assets (benefits over many years) and is planned in the capital budget and appraised by investment techniques. Revenue expenditure is short-term operating cost planned in the operating budget and expensed in the period. The distinction affects which budget it sits in and how it's evaluated.
New machine = capex (capital budget); machine repair = revenue (operating budget).
Real-world example A new delivery vehicle goes in the capital budget; its fuel goes in the operating budget.

Common follow-ups: Which budget holds capex? | How is each evaluated?

Types of Budgets The Master Budget Capital Budgeting
All 34 Capital Budgeting questions