Technical definition
Spending to acquire, construct or improve long-lived assets expected to benefit future periods.
How it works
Qualifying expenditure is initially recognized as an asset and then expensed through depreciation or amortization over time. Cash payments normally appear in investing activities, while non-cash acquisitions require separate disclosure.
Everyday example
Buying production equipment for $50,000 is capital expenditure: Equipment increases, Cash decreases and future depreciation allocates the cost.
Common pitfall
Capital expenditure is not immediately identical to expense, and not every large payment qualifies for capitalization.