I do not understand what capital expenses are compared to just typical business expenses. Also what it means it capitalize an expense? I thought maybe amortize it, but I really am not sure? Thank you!
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A capital expense is money or debt spent on something that has lasting, tangible value. If you can sell it after you bought it, it’s likely a capital expense. Durable goods are capital expenses, most services or fees are not. If you spend $200 on a sign… $100 for the sign, $50 for delivery, and $50 for installation, the $100 for the sign is a capital expense, but the delivery and installation of the sign are operational expenses.
Capitalizing an expense is using semantics to make an operational expense look like a capital expense. i.e. purchasing a Sign Package for $200 that includes delivery and installation. Technically, you could sell that package for $200 up until the day the sign is installed. This is done for accounting purposes, when you’d rather have money appear as an asset after it’s already been spent.
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