Startup Accounting
CapEx vs OpEx: Expense Classification
Collated by Aparna Devalla, CPA
Curated by Rubric Financial
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Definitions and Tax Implications
- Capital expenditures (CapEx) are costs that create or improve long-term assets, recorded on the balance sheet and depreciated or amortized over their useful life.
- Operating expenditures (OpEx) are day-to-day costs of running the business, fully expensed on the income statement in the period they are incurred.
- CapEx reduces taxable income gradually through depreciation deductions over multiple years, while OpEx provides an immediate deduction in the current year.
- The classification directly impacts your reported profitability, tax liability, and cash flow statement presentation.
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