Current expenditure is the expenditure on goods and services consumed in the current year, which must be recurrent to sustain the production of educational services. Minor expenses on items of equipment, below a certain cost threshold, are also reported as ongoing expenses.
Current expenditures include final consumption expenditure, property income paid, grants, and other current transfers (eg, social security, social assistance, pensions, and other social benefits).
Current expenses are also funds used by a business to acquire or improve physical assets such as property, industrial buildings, or equipment. It is often used to undertake new projects or investments by the company. This type of disbursement is also made by companies to maintain or increase the scope of their operations. These expenses can include everything from repairing a roof to construction, to buying a piece of equipment, or building a new factory.
In accounting terms, an expense is considered a capital expense when the asset is a newly acquired capital asset or an investment that improves the useful life of an existing capital asset. If an expense is a capital expense, it must be capitalized. This requires the company to spread the cost of the expense (the fixed cost) over the useful life of the asset. If, however, the expense is one that maintains the asset in its current condition, the cost is fully deducted in the year of expense.
The amount of capital expenditures a business is likely to have depends on the industry it occupies. Some of the most capital-intensive industries have the highest levels of capital expenditures, including oil exploration and production, telecommunications, manufacturing, and utilities.
Capital spending should not be confused with operating income or expense (OPEX) spending. Income expenses are short-term expenses required to cover the operational costs of running a business, and are therefore essentially identical to operating expenses. Unlike capital expenditures, income expenditures can be tax deductible in the same year the expenses occur.
