What is the difference between capital and current expenses?

Mainly, I am not too clear on capital and current expenses. What is the difference of the two? .

Chicago, IL -

Attorney Answers (1)

Dana Whitney Atchley

Dana Whitney Atchley

Tax Lawyer - New York, NY

Are you asking for tax purposes or as a general matter of accounting? In general, a capital expenditure is a cost you incur to create or purchase a long-lived asset, such as a car, or a computer, or a piece of machinery used in the trade or business. An expense, on the other hand, is, generally speaking, a cost incurred as part of doing business that doesn't create or provide a long-lived asset. A good example is paying the janitor for sweeping up; all you get from that is a clean floor, which will most likely be dirty again within a week's time.

There are a lot of areas where the distinction is not nearly so clear; for those matters you should be consulting an accountant or a CPA.

My answer does not constitute legal advice and may not be relied upon by anyone for any purpose and does not... more

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