What is capital expenditure, costing method and depreciation?

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22nd Jun 2020 Business Question Reference this

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Question

What is capital expenditure?costing method? and depreciation?

Answer

Capital expenditure refers to the funds used by a firm to maintain or acquire fixed assets. These can include but are not limited to: vehicles, property, land, equipment, etc. Costing methods in manufacturing refer to accounting techniques that are used to gain an understanding of the value of inputs and outputs in a production process. An example of a costing method is the Activity-Based costing. This information can be used to make decisions about pricing and/or production levels. Depreciation refers to a decrease in the value of an asset over a period of time, usually to reflect the wear and tear. The two common ways to calculate depreciation are: straight line method or reducing balance.

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