Capital expenditure

In this lesson

1. 0:00 Welcome to capital budgeting
2. 0:15 Capital vs revenue expenditure explained
3. 2:28 Understanding capital expenditure
4. 4:07 Revenue expenditure and repairs
5. 6:12 Capital income and revenue income
6. 9:13 Capital expenditure budgets and planning
7. 11:02 CapEx budget integration with master budget

About this lesson

You'll explore what qualifies as capital expenditure—from purchasing new non-current assets like production lines and vehicles to enhancing existing assets—and how it differs fundamentally from revenue expenditure like repairs and maintenance. The lesson covers how capital expenditure is treated on the statement of financial position through depreciation, whereas revenue expenditure flows directly through the profit and loss account, and explains why this distinction significantly impacts reported profits across multiple periods. You'll also discover how capital expenditure budgets form a critical part of long-term business planning and why senior management scrutinises these decisions carefully. The lesson walks through the practical budgeting process, including how divisional businesses prepare individual CapEx budgets, how management prioritises spending when funds are limited, and how capital expenditure decisions cascade through the master budget to affect your statement of financial position, profit and loss account, and cash flow statement. This foundation sets you up perfectly for investment appraisal techniques, where you'll learn to evaluate whether large capital spending decisions are financially viable and aligned with shareholder expectations.

Duration: 13m