Capital expenditures

Capital costs are the costs of the enterprise, which are incurred when acquiring, creating, improving, expanding the assets of the enterprise. The main point is that from this kind of expenses the profit will come through for more than one accounting period, but several. Capital costs are spent on the purchase of fixed assets, obtaining them for long-term lease, improvement of the fixed assets available to the enterprise. At the end of all accounting periods, these costs are shown in the Balance Sheet Asset, in the line corresponding to the name of this core asset. Throughout the entire activity of the enterprise, most of the capital expenditure is gradually becoming a cost in the process of forming the financial result. When determining the company's net profit for the year, the corresponding accounting officer calculates what part of the value of a particular fixed asset can be spent this year. Since such a distribution of fixed assets is more relevant to design measurements, the financial result accounts should be considered as acceptable approximate values of annual profit.

Capital costs have one subjective point: the accrual of a certain percentage on the fixed capital invested in stocks. It varies among different enterprises depending on the base rate ( bank interest rate ). The meaning of using such a rate or related rates is that the funds needed to replace such capital can be purchased at such a rate.

Capital expenditures are expenses for technical re-equipment, reconstruction of existing ones and acquisition of new (previously unused) fixed assets. Thanks to them, a simple and wide reproduction of the assets of the enterprise is carried out. Capital expenditures require clear and constant monitoring. To determine their size in the enterprise, add up the budget of these costs. During this calculation, all planned capital investments are counted. This budget includes such data:

- the initial value of the available fixed assets, calculated for a specific date (the beginning of the period);

- the amount of depreciation deductions, which is supposed to be charged in the planning period;

- the amount of unused amortization at the beginning of the planned period;

- an approximate calculation of the cost of all equipment to be sold or replaced in the planning period;

- the approximate amount of amortization, intended for the acquisition of fixed assets in the planning period;

- the residual value of funds, as well as the amount of amortization of the enterprise on the final date of the planned period.

Capital costs are calculated on the basis of calendar plans for the implementation of investment projects , a financing strategy, a budget application for the purchase of fixed assets, a preliminary schedule of investment expenditure flows.

This type of capital investment is inherently a one-time cost, aimed at increasing the volume of fixed assets intended for expansion of production. They are a combination of various economic resources intended for the reproduction of fixed assets. Capital costs of the enterprise are divided into direct and indirect. These direct costs direct directly to a specific object of investment in the production sector, indirect (conjugate) - on the associated with the main objects (production or social infrastructure).

As a rule, the source of capital expenditures is a part of the enterprise's profit, depreciation or credit resources.