Capital Outlay

Capital Outlay: Is simply means that the money spent for acquires, repair and maintain or upgrade the capital assets. Capital Assets is also known as fixed assets that may includes machinery ,land & building , facilities or other business necessarily  that are not expended during the normal use. Capital outlays are referred as capital expenditure that is recorded by the accountant as company liability in balance sheet.

                In other word, we can say that the capital outlay is money spends to either purchase a fixed assets or to extend its useful life. Fixed asset are those that appear on the balance sheet as property, plant and equipment. It is the essentially investment in the company, the accounting treatment of capital expenditure different from that operational expense.
 

Difference between Investment and Maintenance

Suppose the companies purchase a new truck that is a capital outlay, money spent for acquire a fixed asset. If we can replace the engine of old truck it is also capital outlay too because when we fix new engine it will extend the life of truck.

But when replace the tires of the truck or servicing of the truck like oiling etc is simple maintenance, the things you do maintain the truck in its current working condition. Maintenance costs are revenue expenditure they are essentially cost of earning revenue not a capital expenditure.

Treatment of Capital outlay

It’s not treated as immediate expenses. For example: If a company spends Rs. 50000/- on purchase a new truck, as per accounting concern company has not any surrender value. Before it you had Rs. 50000/- worth of cash of plant, property and equipment the net asset value remain same. The truck has a finite useful life, so you can expense the amount of Rs. 50000/-cost over useful life, the process is known as depreciation. On the other hand revenue expenditure is immediately done. If the oiling of truck is changes Rs. 500/-it is immediate expense.