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Capital investment is spending that has long term value to a business. This is often contrasted with expenses that have value to the business today. The following are common types of capital investment.
Land & BuildingsThe purchase of land and buildings for your business.ConstructionAny costs that go into constructing a building or structure is a capital investment.LandscapingProductive changes to land such as an irrigation system for a farm.ImprovementsMaintenance is expensed. Significant improvements to capital that significantly extend its lifespan are capital investments.
Furniture & FixturesAnything that goes into the interior of a building such as a couch or painting that is part of the decor.Infrastructure such as networking equipment for a data center.MachinesMachines such as an industrial robot.ComputingComputing equipment and devices.VehiclesVehicles used in your business.
Software DevelopmentSoftware development can often be capitalized for software that is successfully operationalized. A failed project is expensed. As such, a project needs to be finalized before it can be capitalized.SoftwareSoftware you buy from other firms is typically considered a capital investment. Recurring as-you-go license fees are expensed.AcquisitionsAcquiring another company that adds value to your business.
BrandingA brand purchased from another company is a capital investment. Developing your own brand is typically viewed as an expense.Intellectual property purchased from another company such as a patent. Your own research and development is typically viewed as an expense with some exceptions.Notes(1) This publication is about the concept of a capital investment. Accounting rules for capitalizing spending are beyond the scope of this publication. This requires the advice of a Registered Professional Accountant with knowledge of the tax treatment of spending in your jurisdictions. (2) Many types of intangible capital are not considered a capital investment according to current accounting practices. For example, investments in your knowledge might be considered human capital but this isn't viewed as a capital investment. Likewise, structural capital, social capital and innovation capital can be impossible to capitalize. This is a common criticism of current accounting practices as investments in physical things are often treated as capital investments where investment in intangible capital are often considered expenses. |
| Type | | | Definition | Spending that has long term value to a business. | | Related Concepts | |
Capital
This is the complete list of articles we have written about capital.
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A list of common types of capital.
A definition of capital goods with examples.
A definition of structural capital with examples.
Assets that have no physical presence.
The 3 main types of intellectual capital.
The basic types of natural capital.
The definition of social capital with examples.
A definition of cultural capital with examples.
A list of key intellectual property terms.
The difference between inventive step and non-obviousness.
A definition of relational capital with examples.
Examples for each of the four factors of production.
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