Definitive Business Plan, Second Edition, The

Capital spending

What capital spending is and isn't

It is easiest to define capital spending by considering what it is not. We have already looked at the cost of sales. These are not capital outlays. Operating costs are things that you spend money on and it is gone – advertising, wages and salaries, rents, travel and telecommunications. This is not capital spending either.

Capital spending is spending on productive items with a life of more than 12 months such as plant, machinery, vehicles, computers, office equipment, fixtures and fittings and intellectual property. Note that capital assets do not have to be things you can touch and feel. They can also be intangible items.

In accounting terms, your asset accounts record other items which for ...