Expenditures to acquire or upgrade long-term assets are called

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

Answer: (C)

Expenditures to acquire or upgrade long-term assets are capital expenditures. These are investments in assets that will benefit the business for more than one accounting period, such as new equipment, buildings, or major improvements. Instead of recording the full cost as an expense in the current period, the cost is capitalized on the balance sheet and then allocated over the asset’s useful life through depreciation (or amortization for intangible assets). Routine, day-to-day costs used to run the business are operating or revenue expenditures and are expensed in the period incurred. Budgets are planning tools, not actual expenditures.