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I guess there's something I don't understand here. You're telling me that if a company spends money to invest in itself or improve its infrastructure, that is
by TheAdamAndChe 6y ago
I guess there's something I don't understand here. You're telling me that if a company spends money to invest in itself or improve its infrastructure, that isn't considered an expense? That seems like it would disincentivize investment in company growth.
- ephextom 6y agoCapital expenditure (infrastructure) and operating expenses are treated differently. An investment in a new factory cannot be deducted as a business expense all at once; it must be depreciated over its useful life, so only a portion of it can be recorded as an operating expense against income for every year it is used. For software companies it's fuzzy; if you have a team of developers constantly working on enhancements to the company's platform, should the staff wages be counted as expenses or capital investment? It comes down to accountancy technicalities: https://www.wallstreetprep.com/knowledge/accounting-capitalized-software-costs/ https://www.wallstreetprep.com/knowledge/accounting-capitali...