Capital Expenditures Archives | Value Investing - Business and Economic Principles

Capital Expenditures

Capital expenditures is a term referring to the cost associated with big ticket items including technology equipment, vehicles,and real estate. Often money is raised through the sale of stock and/or borrowing money from a financial institution. Capital expenditures tie to other terms such as ‘Debt Service’, ‘Interest on Debt’ and so on.

Bookkeeping – Introduction to Depreciation (Lesson 50)

Bookkeeping - Regular Business Activity / By David J Hoare MSA / 03/12/2017 02/16/2022

Depreciation is the process of allocating the initial capital outlay for fixed asset purchases over time to the income statement. The basic principle with depreciation is that any fixed asset has a predetermined lifetime based on time, usage or fair market value. Therefore, a fair and equitable allocation of the initial purchase price is applied to each time period. Your job as the bookkeeper is to assign depreciation expense to the respective asset and record the entry as a function of daily operations.

Replacement Reserves- Understanding the Fundamentals

REITs Pool, Investment Fund / By David J Hoare MSA / 04/09/2016 02/05/2022

Long and short term housing rental businesses use a financial operations tool to maintain, repair and upgrade the physical facilities. This tool is known as replacement reserves in the real estate industry. In almost all cases it is a contractual agreement requirement between the mortgage lender and the borrower.

Value Investing – Gross Domestic Product (Lesson 21)

Phase II - Financial Analysis, Lessons/Tutorials/Resources / By David J Hoare MSA / 06/30/2014 02/12/2022

Gross Domestic Product is defined as the total production for the country. It is measured by including all the dollars spent to purchase products/services from all the various sellers of goods. The largest purchaser of products/services is consumers. Coming in behind consumers are businesses, remember they are buying goods too. This includes everything from office supplies to the raw materials to make the products the consumers ultimately purchase.

Capital Expenditures – IRS Definition

Income Taxes / By David J Hoare MSA / 01/21/2014 03/01/2022

The Internal Revenue Service uses a complex definition to identify capital expenditures (assets). A capital expenditure is not deductible as an expense in the tax year purchased; the taxpayer or entity must use depreciation, amortization or depletion to obtain deductible value on the entity’s return.

Internal Revenue Service (IRS) Definition of an Expense

Income Taxes / By David J Hoare MSA / 04/03/2013 03/01/2022

The Internal Revenue Service defines a business expense as ‘ordinary’ and ‘necessary’. Ordinary expenses are those costs typically incurred in your industry. A restaurant would not ordinarily purchase vaccines. And a medical practice would not purchase 50 heads of lettuce.