Overview on the definition of a capital expenditure.
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Define a capital expenditure.
List at least 5 examples of a capital asset that specifically relate to the professional experience the Expert.
Provide at least 3 examples of what is NOT a capital asset.
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Solution Summary
Your tutorial is 918 words plus five references and discusses the three views of capital assets (economics, accounting and tax). Six examples form a health care perspectives are discussed and fives examples of what is NOT a capital asset are given.
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Definition a capital expenditure
There are multiple definitions but they have some aspects in common. The economic definition is an asset that generates income. In accounting, it is an asset that is used in the business and benefits multiple periods. In tax work, a capital asset is one that is held for investment purposes. All of these points of view exclude inventory, which is the product sold to customers, as specifically NOT a capital asset. Inventory is instead an operating asset that is consumed as part of the core business activity (selling to customers).
Capital assets are generally considered longer term in nature. The tax view distinguishes between short term and long term capital investments, even to the point of taxing them differently. In accounting reports, capital assets are reported as assets in the balance sheet and depreciated over their useful lives, lowering the book value of the assets over time.
Examples of a capital asset that specifically relate to professional experience
1. Land.
Land is a special kind of capital asset, at least from an accounting point of view. Land is one of the few assets that are not depreciated (the others are fully depreciated assets and idle assets not in use). Land is not expected to "get used up." That is, you can drive to the land, put buckets in your car and drive off, but all you did was dirty your car. The asset is still there! From my years in real estate, I know that land values can shift by ...
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- BSc, University of Virginia
- MSc, University of Virginia
- PhD, Georgia State University
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