Also known as capex. Expenses incurred in acquiring, repairing, or improving physical assets (such as equipment, property, or plants), including acquiring assets under a capital lease, restoring or adapting property to a new or different use, and starting a new business.

Costs are either expensed or capitalized. Expenses for a particular month are listed on the financial statement as a cost incurred that month and deducted for tax purposes. Capital expenditures show up on the balance sheet and are not deductible in the year in which they are paid or incurred. These costs are capitalized, meaning they are amortized or depreciated (spread) over the useful life of the asset. If the property to which the expenses apply has a useful life longer than a taxable year, the cost must be capitalized.