Let me first explain the meaning of both the terms CapEx and OpEx Capital expenditure (in short CapEx) is basically incurred for Fixed assets like building, furniture, machinery, etc., or an intangible asset like Goodwill, patent, etc. This expenses are incurred in order to acquire a new asset or imRead more
Let me first explain the meaning of both the terms CapEx and OpEx
Capital expenditure (in short CapEx) is basically incurred for Fixed assets like building,furniture, machinery, etc., or an intangible asset like Goodwill, patent, etc. This expenses are incurred in order to acquire a new asset or improve an existing one or maintain the asset in use.
Capital expenditure is commonly found in the Cash flow statement under Investing activities as Investment in plant, machinery, equipment, etc.
Operating Expenditure (in short OpEx) are day-to-day expenses incurred by a firm in order to carry its normal business.
Expenses such as rent, advertisement, inventory costs, etc.
Operating Expenses are shown in the income statement of the company as expenses incurred during the period.
For Example: If a company purchases a printer, the printer would be a capital expenditure and the papers used for the printer would be operating expenditure.
Difference between CapEx and OpEx
Example 1: A company wants to lease machinery instead of buying it, in this case buying machinery would be capital expenditure, and leasing the machinery would be an Operating expense.
Example 2: Buying machinery would cost a company for 50000 and leasing the same would cost 35000. So in this case leasing will be more preferred by a company which means operating expenditure would be preferred instead of a capital expenditure.
From the point of view of tax treatment operating expenditure is more preferred over Capital expenditure because the expenses incurred during the year are deducted during the same year which reduces the tax levied on net income.
Some real Examples from the Company Amazon
This is the cash flow statement of Amazon, where the investing activities shows the capital expenditure incurred by the company during the years.
This is the income statement of Amazon, it shows the operating expenditure incurred by the company during the year.
Let me first explain the meaning of both the terms CapEx and OpEx Capital expenditure (in short CapEx) is basically incurred for Fixed assets like building, furniture, machinery, etc., or an intangible asset like Goodwill, patent, etc. This expenses are incurred in order to acquire a new asset or imRead more
Let me first explain the meaning of both the terms CapEx and OpEx
Capital expenditure (in short CapEx) is basically incurred for Fixed assets like building, furniture, machinery, etc., or an intangible asset like Goodwill, patent, etc. This expenses are incurred in order to acquire a new asset or improve an existing one or maintain the asset in use.
Capital expenditure is commonly found in the Cash flow statement under Investing activities as Investment in plant, machinery, equipment, etc.
Operating Expenditure (in short OpEx) are day-to-day expenses incurred by a firm in order to carry its normal business.
Expenses such as rent, advertisement, inventory costs, etc.
Operating Expenses are shown in the income statement of the company as expenses incurred during the period.
For Example: If a company purchases a printer, the printer would be a capital expenditure and the papers used for the printer would be operating expenditure.
Difference between CapEx and OpEx
Example 1: A company wants to lease machinery instead of buying it, in this case buying machinery would be capital expenditure, and leasing the machinery would be an Operating expense.
Example 2: Buying machinery would cost a company for 50000 and leasing the same would cost 35000. So in this case leasing will be more preferred by a company which means operating expenditure would be preferred instead of a capital expenditure.
From the point of view of tax treatment operating expenditure is more preferred over Capital expenditure because the expenses incurred during the year are deducted during the same year which reduces the tax levied on net income.
Some real Examples from the Company Amazon
This is the cash flow statement of Amazon, where the investing activities shows the capital expenditure incurred by the company during the years.
This is the income statement of Amazon, it shows the operating expenditure incurred by the company during the year.
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