Capital Expenditure Budget: Definition & Preparation

Capital Expenditure Budget: Definition & Preparation
Coming up next: Cash Budget: Definition & Examples

You're on a roll. Keep up the good work!

Take Quiz Watch Next Lesson
 Replay
Your next lesson will play in 10 seconds
  • 0:03 What Is a Capital…
  • 0:50 How Is this Budget Made?
  • 1:31 Role with Other Budgets
  • 2:16 Other Uses for this Budget
  • 2:51 Lesson Summary
Add to Add to Add to

Want to watch this again later?

Log in or sign up to add this lesson to a Custom Course.

Log in or Sign up

Timeline
Autoplay
Autoplay
Speed

Recommended Lessons and Courses for You

Lesson Transcript
Instructor: Kevin Newton

Kevin has edited encyclopedias, taught middle and high school history, and has a master's degree in Islamic law.

Since companies must constantly upgrade and update their equipment, it's no surprise that the capital expenditure budget is one of the most important documents that a company will produce. Learn more about it in this lesson.

What Is a Capital Expenditure Budget?

Companies are constantly looking for ways to expand their operations or make them more competitive, but doing so requires a certain amount of planning. The planning for such capital expenses, or those expenses that make a company more competitive or have great abilities, are recorded in the capital expenditure budget, which generally speaking, is a useful tool when planning how to spend money on capital expenditures, those expenses that will ultimately make the firm more money or more efficient. For a company that is looking to overhaul its equipment or make major changes to its scope of potential operations, the capital expenditure budget is one of the most important documents that can be produced. In this lesson, we'll look at how they are made, as well as how they interact with other financial documents within an organization.

How Is this Budget Made?

Before we start writing a capital expenditure budget, we first have to know what our planned capital expenses are. To do this, planners have to consider where the most pressing needs are for improvement, how advances in technology are most likely to help them, and what the needs of the business are for the coming year. Think about it like this: If you were considering upgrading your computer, you would likely only do so if you actually planned on using your computer. Otherwise, it would just be a waste of money. From there, each potential investment is listed, along with the cost and the time of year when it is to be purchased. For continuing investments, the cost is split up in accordance to how it will be spent.

To unlock this lesson you must be a Study.com Member.
Create your account

Register to view this lesson

Are you a student or a teacher?

Unlock Your Education

See for yourself why 30 million people use Study.com

Become a Study.com member and start learning now.
Become a Member  Back
What teachers are saying about Study.com
Try it risk-free for 30 days

Earning College Credit

Did you know… We have over 200 college courses that prepare you to earn credit by exam that is accepted by over 1,500 colleges and universities. You can test out of the first two years of college and save thousands off your degree. Anyone can earn credit-by-exam regardless of age or education level.

To learn more, visit our Earning Credit Page

Transferring credit to the school of your choice

Not sure what college you want to attend yet? Study.com has thousands of articles about every imaginable degree, area of study and career path that can help you find the school that's right for you.

Create an account to start this course today
Try it risk-free for 30 days!
Create an account
Support