A capital expenditure is money spent to acquire or improve a long-lived asset, capitalised and depreciated over time rather than expensed immediately.
Capital expenditure is spending on assets that benefit the business for more than one year, equipment, vehicles, buildings, major improvements. Unlike an operating expense, CapEx is capitalised: recorded as an asset and deducted gradually through depreciation for accounting and capital cost allowance for tax.
The distinction between CapEx and a repair or operating expense matters greatly for tax timing. A genuine repair is deductible now; an improvement that betters the asset is capitalised and deducted over years. Misclassifying capital costs as immediate expenses is a common CRA adjustment.
Replacing a roof that extends a building's life is capital expenditure, capitalised and depreciated. Patching a leak is a repair, deductible immediately. The tax timing of the deduction differs sharply between the two.
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