Capital Expenditures vs Operating Costs

Capital expenditures (CapEx) are the cost of purchasing, maintaining, and improving fixed assets. Examples include buildings, machinery, vehicles, and equipment. These expenditures are intended to benefit the company for more than one year so they are capitalized (made an asset) and then expensed over time through depreciation. Thus, capital expenditures are additions to the property, plant, and equipment account which appears on the balance sheet. Cash outflows for capital expenditures are shown in the investing section of the statement of cash flows.

Operating expenditures (OpEx) are the day-to-day costs of running a business. Examples of operating costs include wages, sales commissions, advertising costs, rent for an office building, and legal fees. Operating costs are expensed as incurred.
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