Capital expenditure (capex)

Published Monday 17 August 2026

Table of contents

• What is capital expenditure (capex)?
• Capex vs opex: what's the difference?
• Types of capital expenditure
• Maintenance capex vs growth capex
• Examples of capital expenditure
• How to calculate capital expenditure
• How capex is recorded: balance sheet, cash flow statement and depreciation
• Track your capital expenditure with Xero
• FAQs on capital expenditure
• Related terms
• Learn more about capital expenditure

Key takeaways

• Capital expenditure (capex) is money spent to buy, upgrade or extend the life of long-term assets such as property, equipment or vehicles.
• Capex differs from operating expenditure (opex) because it funds assets you'll use for years, while opex covers everyday running costs.
• You record capex on the balance sheet as an asset and depreciate it over time, rather than expensing it immediately on the profit and loss statement.
• Tracking capex helps you plan cash flow, manage asset values and make informed decisions about growing your business.

What is capital expenditure (capex)?

Capital expenditure, also known as capex, is money your business spends to acquire, upgrade or extend the useful life of a long-term asset. Common examples include land, buildings, equipment and vehicles.

Unlike day-to-day expenses, capex is recorded on the balance sheet under assets, often listed as property, plant and equipment (PP&E). This treatment reflects the fact that these assets will benefit your business for several years. Rather than appearing as an expense on the profit and loss statement in one hit, capex is depreciated over the asset's useful life.

Capex vs opex: what's the difference?

The key difference between capex and opex comes down to how and how long you use what you're paying for.

Capex buys assets you'll use for more than one year. Operating expenditure (opex), on the other hand, covers the day-to-day costs of running your business. Opex includes items such as payroll, rent, utilities, insurance, marketing and materials consumed during production. These costs are expensed in full during the period they occur, while capex is spread across multiple periods through depreciation.

Types of capital expenditure

Businesses make capital expenditures for different reasons. Here are the most common types:

• Replacing or upgrading existing equipment to maintain productivity
• Expanding capacity for current products or services
• Investing in new products or entering new markets
• Purchases required to meet regulatory or safety requirements

Maintenance capex vs growth capex

Not all capital expenditure serves the same purpose. Understanding the distinction between maintenance capex and growth capex can help you plan your spending.

Maintenance capex replaces or repairs existing assets so your business can sustain its current level of revenue and profitability. For example, replacing an old warehouse forklift falls into this category. It's a necessary expense to keep operations running smoothly.

Growth capex adds new assets that help you expand revenue, increase capacity or reach new markets. Buying three new forklifts to equip a larger warehouse is an example of growth capex. This type of spending is discretionary and typically tied to strategic plans for expansion.

Examples of capital expenditure

Capital expenditure covers a wide range of asset purchases. Here are some common examples:

• Property, including land and buildings
• Fit-outs such as furniture and infrastructure improvements
• Equipment, vehicles and work tools like computers
• Research and development (R&D)
• Intellectual property such as patents and copyrights
• Buying a new business

How to calculate capital expenditure

You can calculate capex using figures from your financial statements. The formula is:

Capex = ending PP&E − beginning PP&E + depreciation

Here's a worked example using illustrative figures:

• Ending PP&E: IDR 500,000,000
• Beginning PP&E: IDR 400,000,000
• Depreciation for the year: IDR 50,000,000
• Capex = IDR 500,000,000 − IDR 400,000,000 + IDR 50,000,000 = IDR 150,000,000

Capex also appears on the cash flow statement under investing activities, showing the actual cash spent on asset purchases during the period.

How capex is recorded: balance sheet, cash flow statement and depreciation

When you make a capital expenditure, it's capitalised rather than expensed immediately. This means the amount is added to the balance sheet as an asset, not recorded as an expense on the profit and loss statement.

Over time, the asset is depreciated to reflect wear, use and obsolescence. Each period, a portion of the asset's value moves from the balance sheet to the profit and loss statement as a depreciation expense. Accumulated depreciation represents the total depreciation recognised since the asset was acquired.

Capex also shows up on the cash flow statement under investing activities. This line item captures the cash outflows for purchasing or upgrading long-term assets during the reporting period.

Track your capital expenditure with Xero

Xero makes it easier to monitor your fixed assets, track depreciation schedules and keep tabs on capital spending. With everything in one place, you can see where your money is going and plan ahead with confidence. Ready to take control of your business finances? Get one month free and see how Xero can help.

FAQs on capital expenditure

Here are answers to common questions about capital expenditure.

What is capital expenditure?

Capital expenditure is money spent to acquire, improve or extend the life of long-term assets. These assets appear on the balance sheet and are depreciated over time rather than expensed in full when purchased.

How do you calculate capex?

Use the formula: capex = ending PP&E − beginning PP&E + depreciation. You can find these figures in your financial statements.

What is the difference between capex and opex?

Capex covers long-term asset purchases that benefit your business for multiple years. Opex covers day-to-day running costs like wages, rent and utilities that are expensed in the period they occur.

What are examples of capital expenditure?

Common examples include property purchases, equipment, vehicles, fit-outs, research and development, intellectual property, and acquiring another business.

How is capex recorded in the accounts?

Capex is capitalised on the balance sheet as an asset, then depreciated over its useful life. The cash outflow appears under investing activities on the cash flow statement.

Related terms

• Assets
• Fixed assets
• Cash flow

Learn more about capital expenditure

• Cash flow management
• Double entry bookkeeping
• Run financial reports