Answer to Question #78797 in Finance for Liam Johnston

Question

Approximately what effect would not purchasing the capital items have?

Answer 1

Small businesses commonly make capital expenditures at one time or another. This cost is an amount you pay to buy or upgrade a long-term asset, such as a computer or a machine. The actual cost of a capital expenditure does not immediately impact the income statement, but gradually reduces profit on the income statement over the asset’s life through depreciation. However, a capital expenditure may immediately affect the income statement in other ways, depending on the type of asset.