Opex vs capex

Published Thursday 23 July 2026

Table of contents

• What is opex (operating expenditure)?
• What is capex (capital expenditure)?
• Difference between opex and capex
• How opex and capex are taxed in Canada
• How to calculate opex and capex
• Track your opex and capex with Xero
• FAQs on opex vs capex
• Related terms
• Learn more about opex and capex

Key takeaways

• Opex covers your day-to-day running costs, like rent, utilities and wages, and you record it on the income statement in the period you spend it.
• Capex covers long-term investments, like equipment, vehicles and property, and you record it on the balance sheet as an asset, then write it off over time.
• Opex reduces your profit now, while capex is treated as an asset and sits outside your immediate profit calculation.
• In Canada, you can generally deduct operating expenses in the year you incur them, but you write off capital purchases gradually through the capital cost allowance (CCA).

What is opex (operating expenditure)?

Operating expenditure (opex) is the day-to-day cost of running your business, and you expense it in the same period you incur it.

You report opex on your income statement, and it covers the regular, recurring costs that keep your business running. Opex doesn't include the cost of goods sold (COGS), which tracks the direct cost of making what you sell.

Common examples of opex include:

• rent and utilities
• wages and salaries
• marketing costs
• insurance premiums
• professional and consultant fees
• depreciation on business assets

What is capex (capital expenditure)?

Capital expenditure (capex) is money you invest in long-term assets that benefit your business for more than one year.

You capitalize capex on your balance sheet as an asset, then write off its value over time rather than all at once.

Common examples of capex include:

• machinery and equipment
• property and buildings
• vehicles
• major technology purchases

Capex usually falls into two types, depending on why you're spending the money:

• maintenance capex: spending that keeps your current performance steady, like replacing broken equipment
• growth capex: spending that expands or improves your business, like buying new equipment or land

Difference between opex and capex

The difference between capex and opex comes down to time and treatment: opex is a short-term running cost you expense now, while capex is a long-term investment you record as an asset. Opex lowers your profit today on the income statement, whereas capex sits on your balance sheet and gets written off over several years.

Here's how the two compare:

• Timeframe: opex is short-term, while capex is long-term.
• Statement: you record opex on the income statement, and capex on the balance sheet.
• Profit impact: opex reduces your profit now, while capex is recorded as an asset and sits outside the immediate profit calculation.
• Spending pattern: opex is stable and recurring, while capex tends to be sporadic.

How opex and capex are taxed in Canada

For tax, opex and capex follow the same short-term versus long-term logic. You can generally deduct operating expenses in the year you incur them, which lowers your taxable income for that period.

Capital purchases work differently, because you can't deduct the full cost at once. Instead, you write it off gradually over several years through the capital cost allowance (CCA).

How to calculate opex and capex

You can work out both figures straight from your financial statements without any complicated math. These two simple formulas give you the numbers you need:

• Opex = total operating expenses for the period.
• Capex = increase in property, plant and equipment (PP&E) over the period + depreciation for the period.

Track your opex and capex with Xero

Xero brings your operating costs and capital investments together in one place, so you can see where your money goes and make confident spending decisions. See your numbers in real time, run reports in a click, and get one month free.

FAQs on opex vs capex

Here are answers to some frequently asked questions about opex vs capex.

Is depreciation capex or opex?

Depreciation is opex. It's an operating expense that spreads the cost of a capital asset across its useful life on your income statement.

Is salary capex or opex?

Salaries and wages are opex. They're recurring, day-to-day running costs that you expense in the period you pay them.

Is software a capital or operating expense?

It depends on how you buy it. A monthly or annual subscription is usually opex, while a large, one-off purchase you use for years is often treated as capex.

How are capex and opex taxed in Canada?

You can generally deduct opex in the year you incur it. Capex is written off gradually over several years through the capital cost allowance (CCA).

Can an expense be both capex and opex?

A single purchase is usually one or the other, not both. But a large asset can involve both, for example, the capex to buy a machine and the opex to run and maintain it.

Related terms

• Capital expenditure
• Operating expense
• Balance sheet
• Cost of goods sold (COGS)

Learn more about opex and capex

• Business cost-saving ideas
• Cost of goods sold guide
• Run financial reports
• Small business guides