A Capital Expenditure Results In A Debit To What?

A Capital Expenditure Results in a Debit To a Fixed Asset / Non Current Asset as any cost incurred in bringing the asset to be ready to use in the business is the part of cost of the Asset. For Example, if we spent wages for the installation of machinery, then although it is a direct expense, but it is the part of the cost of the machinery, so it is an addition to the cost of the machinery and we debit machinery account instead of wages account, when we pass Accounting Journal Entry.

 

The Capital Expenditure Journal Entry is shown below:


                                                      Machinery a/c      XXX


                                                                             Cash a/c    XXX

(Addition To Machinery Account For The Period

Similarly, when we paid carriage expense for the transportation of Machinery or Furniture one place to another is also a capital expenditure and should be added to the cost of these assets and debit with Machinery or Furniture Account and not Carriage Account which is just an addition to the cost of these assets.