What Is Capital Equipment?

Capital equipment is a long-term resource that a company owns.

Senior corporate executives establish adequate and functional capital equipment procedures to ensure that a company's financial statements are accurate. Capital equipment is generally a major part of a firm's balance sheet.

Definition

Capital equipment is a long-term asset that a firm intends to use in operating activities for more than a year. An asset is an economic resource that a company owns. Capital equipment includes machinery, trucks and mechanical or manufacturing equipment.

Accounting

To record the purchase of capital equipment, an accountant debits the property, plant and equipment account and credits the vendor payables account. To depreciate capital equipment, the accountant debits the depreciation expense account and credits the accumulated depreciation account. Depreciation means allocating the cost of an asset over several years.

Financial Reporting

An accountant reports capital equipment as long-term asset in the balance sheet, also called a statement of financial condition or statement of financial position. Depreciation expense is a line item in the statement of profit and loss, otherwise known as statement of income or income statement.

References

• Investopedia: Capital Asset
• Investopedia: Capital Expenditure - CAPEX