Capital expenditures vs. revenue expenditures: What's the difference?
It’s not enough to say that capital expenditures are everything that revenue expenditures aren’t. They break down differently, depending on the size of the payment and the time across which it needs to be paid for. Plus, capital expenditures will show up differently on your reporting metrics.
Revenue expenditures expense in the current period, or shortly thereafter, and are consumed within a very short time. After this, they will bear no further effect on your expenses, unless they recur, in which case each separate recurrence is expensed separately.
Capital expenditures (CAPEX)—any outlay made by your company to procure fixed assets, such as the long-term use of machinery or property—are assumed to be consumed over their useful life and are expensed gradually, via their depreciation value. Company B’s brand-new research facility, for instance, would be a capital expenditure. The costs of running the machinery in it, on the other hand, would be revenue expenditures.
Depending on the type and price of machinery in question, the cost of buying those machines would be either revenue or capital expenditures. Long-term-use machines, or machines that are much more expensive, would come under the capital bracket; anything else would settle as revenue expenditures.
Revenue expenditures are usually less expensive than capital expenditures, small enough to be expensed against a shorter revenue period.
Capital expenditures involve larger monetary amounts that are too large to be expensed against a shorter revenue period. They were purchased because of their long-term benefits of growing a company or generating profit.