Expenditures to acquire or upgrade long-term assets are called

• A. Operating Expenses
• B. Depreciation
• C. Capital Expenditures
• D. Revenue Expenditures

Answer: (C)

Capital expenditures are investments in assets that will benefit the business for more than one year, such as buying new equipment, upgrading machinery, or expanding facilities. These costs are recorded on the balance sheet as assets and are depreciated (or amortized) over the asset’s useful life, rather than being expensed all at once in the period incurred. This contrasts with operating expenses, which cover routine, day-to-day costs and are expensed in the period they occur. Depreciation is the gradual allocation of an asset’s cost over time, not the initial outlay, and revenue expenditures are costs that are expensed immediately because they only support current-period revenue (like routine maintenance). So expenditures to acquire or upgrade long-term assets are called capital expenditures.