Capital addition

Capital addition,

Definition of Capital addition:

  1. Another way of describing a capital addition is that it is any investment that improves an existing fixed asset or results in the addition of a new fixed asset. As such, a capital addition makes a company or other entity's fixed asset base larger. Any other expenditure would entail a maintenance expense and would be recorded as such.

  2. The amount of expense for adding additional assets or improving existing assets within a business. Capital additions are not repairs made to maintain the usability of equipment but may include new parts necessary to increase production or equipment life.

  3. Capital addition is the cost involved for adding new assets or improving existing assets within a business, also called capital expenditures. Capital additions may take the form of adding new parts or features that are expected to increase the useful life of potential of an asset or may involve adding new assets to increase production or capacity. However, repairs made to maintain the usefulness of a piece of equipment or an asset is merely maintenance and not a capital addition—these distinctions are important for capital budgeting and fixed asset accounting.

How to use Capital addition in a sentence?

  1. These charges are generally recorded on the balance sheet and not the income statement. .
  2. Capital addition can also refer to a capital injection for a bank or an improvement to real estate—which is generally tax-deductible. .
  3. Capital additions, also called capital expenditures, are costs involved in buying new assets or improving existing assets. .
  4. Money spent to maintain or repair an asset would not be a capital addition and instead, be recorded as an expense on the income statement. .
  5. Property insurance capital additions are how the insured value of a home or property will need to be amended if there’s an expansion or renovation of the property.

Meaning of Capital addition & Capital addition Definition