Capital expenditure is defined as which of the following?

• A. The money spent on purchasing or maintaining fixed assets
• B. The money spent on marketing campaigns
• C. The money paid to dividends
• D. The money spent on daily operating costs

Answer: (A)

Capital expenditure is the money a business spends to acquire or upgrade physical assets that will be used over multiple years. These costs show up on the balance sheet as fixed assets and are then depreciated over their useful life. The other items—marketing campaigns, dividends, and daily operating costs—are considered operating expenses or distributions of profits, not long-term asset investments. Therefore, spending on purchasing or maintaining fixed assets best fits the definition of capital expenditure.