Capital expenditure (capex)

Published Monday 17 August 2026

Table of contents

• What is capital expenditure?
• Capex vs opex: what's the difference?
• Examples of capital expenditure
• Maintenance capex vs growth capex
• How to calculate capital expenditure
• How capital expenditure appears in your accounts
• Capital allowances and tax on capex in Malaysia
• Track capital expenditure with Xero
• FAQs on capital expenditure
• Related terms
• Learn more about capital expenditure

Key takeaways

• Capital expenditure (capex) is money you spend to buy or upgrade a long-term asset, such as land, equipment, or a building.
• Capex sits on your balance sheet as an asset and is written down over the asset's useful life through depreciation, rather than expensed all at once like day-to-day operating costs.
• A common way to work out capex is to take the change in your fixed assets between two periods and add back the depreciation charged in the later period.
• In Malaysia, capex usually can't be deducted straight away, but qualifying assets like plant and machinery may attract capital allowances under the Income Tax Act 1967.

What is capital expenditure?

Capital expenditure is money you spend to acquire or upgrade a long-term asset such as land, equipment, or a building. It's also known as capex.

You make capital expenditures on assets you expect to benefit your business for more than a year. A work computer is a good example, as long as you plan to use it in the business rather than sell it within 12 months. Because these are fixed assets, you record the cost on your balance sheet rather than writing it off immediately.

Capex vs opex: what's the difference?

The main difference between capex and opex is how long the spending benefits your business. Capital expenditures buy assets you'll use to earn money over a long period, while operating expenditures (opex) are what you spend to run your business day to day.

A useful test is the useful life of what you bought. If the benefit lasts more than a year, it's usually capex. If it's consumed within the year, it's usually opex. Your operating expenses typically include payroll, utilities, insurance, marketing, and the materials you use up in production.

Examples of capital expenditure

Capex covers a wide range of long-term assets, both physical and intangible. Common examples include:

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

Maintenance capex vs growth capex

Capex falls into two types, and telling them apart helps you plan spending and judge how much is essential. The two types are maintenance capex and growth capex.

• Maintenance capex is what you spend to replace assets so you can keep operating and hold your current level of revenue and profitability. Replacing an old warehouse forklift is an example, and it's a necessary cost if you want to keep the business running.
• Growth capex is money you spend to grow revenue and profitability by adding assets that increase productivity, lift capacity, or expand into new markets. Buying three new forklifts for a larger warehouse is an example, and it's a discretionary cost.

How to calculate capital expenditure

You can work out capex from two figures in your accounts: the change in your fixed assets and the depreciation for the period. The formula is:

Capex = (current period property, plant and equipment − prior period property, plant and equipment) + current period depreciation

Here's a short example. Say your property, plant and equipment rose from RM200,000 to RM260,000 over the year, and you charged RM40,000 in depreciation during that year. Your capex is (RM260,000 − RM200,000) + RM40,000 = RM100,000. You add depreciation back because it lowers the book value of your assets without being new spending.

How capital expenditure appears in your accounts

Capex touches more than one of your financial statements, so it helps to know where each part lands. When you buy the asset, the cost goes on your balance sheet as property, plant and equipment, and the cash you paid shows up under investing activities in your cash flow statement.

From there, you spread the cost across the asset's useful life through depreciation, which appears as an expense on your profit and loss statement each period. As depreciation builds up, it reduces the asset's net book value on the balance sheet, so your accounts reflect what the asset is realistically worth today.

Capital allowances and tax on capex in Malaysia

In Malaysia, capital expenditure generally can't be claimed as an immediate tax deduction the way an operating expense can. Instead, qualifying assets may attract capital allowances, which let you write off the cost over time.

Capital allowances are set out in Schedule 3 of the Income Tax Act 1967 and administered by the Inland Revenue Board of Malaysia (LHDN). Assets such as plant, machinery, and equipment can qualify, usually through an initial allowance in the year of purchase plus annual allowances after that. The rates and eligibility depend on the asset and can change, so check the current rules with LHDN or your accountant before you file. Planning capex around these allowances also helps you protect cash flow across the year.

Track capital expenditure with Xero

Getting capex right means keeping a clear record of what you bought, what it's worth now, and how it's being depreciated. Xero helps you track fixed assets, run depreciation automatically, and see the effect on your reports in real time, so your balance sheet stays accurate as your business invests and grows. You can get one month free and see how Xero keeps your capital expenditure organised from purchase to write-off.

FAQs on capital expenditure

Here are answers to a few common questions about capital expenditure.

Is capital expenditure an asset or an expense?

Capex creates an asset on your balance sheet, not an immediate expense. The cost is recognised gradually as an expense through depreciation over the asset's useful life.

Is capital expenditure tax deductible in Malaysia?

Capex is not usually deductible as a direct expense in Malaysia, but qualifying assets can attract capital allowances under the Income Tax Act 1967. That lets you recover the cost over several years rather than all at once.

What's the difference between capex and revenue expenditure?

Capex buys long-term assets that benefit the business for more than a year, while revenue expenditure covers the short-term running costs consumed within the year. Capex is capitalised on the balance sheet; revenue expenditure is expensed straight away.

Can capital expenditure be negative?

Capex can show as negative in a calculation if you sold or disposed of more fixed assets than you bought in the period. It signals that your asset base shrank rather than grew during that time.

Related terms

• Opex vs capex
• Assets
• Non-current assets
• Amortisation
• Book value

Learn more about capital expenditure

• Financial statements: types, uses and how to read them
• Double-entry bookkeeping: a simple guide
• Owner's equity: definition and how to calculate yours