Q:

What is the difference between CAPEX and OPEX?

A:

Quick Answer

CAPEX is a capital expenditure, while OPEX is an operational expenditure. A capital expenditure is one that is used to create something that will benefit the company in the future, otherwise known as an asset. Operational expenditures are expenses that are required for the day-to-day operations of the company, such as salaries, utilities and insurance.

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Full Answer

Capital expenditures, CAPEX, are monetary investments made by the company, whether the money is spent to acquire a building, machinery, inventory or intellectual property such as patents. These expenses are expected to financially benefit the company longer than the current tax year. Operational expenses, OPEX, are expenditures that are made to produce the good or service that the company provides. These expenses are anything that relate to the running of the company including general, sales and administrative expenses. The cost of goods sold does not count toward the total OPEX.

OPEX is also used when taking into account the money lost through depreciation, including the depreciation of assets such as machinery that is used in daily operations and production of goods. Operational expenses are fully deducted from accounting records in the period in which they are incurred. CAPEX are either depreciated as OPEX or are amortized over time rather than deducted all at once from accounting records.

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