Capital expenditure (CapEx) is the spending onlong-term assets like machinery or property to sustain or expand a business. CapEx contrasts with operating expenses (OpEx), which are day-to-day costs like rent or salaries. Capital expenditures are often capitalised, meaning the costis spread over the asset’s useful life through depreciation or amortisation.

Example: An architecture firm buys new computers for £10,000 and renovates its office for £15,000. These investments are classified as capital expenditure because the computers and office improvements are expected to be used for several years. The firm capitalises the costs and depreciates the assets over their useful lives.