Which statement best defines capital expenditure?

• A. Money spent on day-to-day expenses
• B. Money spent to acquire an asset for several years
• C. Income from day-to-day sales
• D. Money paid to suppliers on credit

Answer: (B)

Capital expenditure is money spent to acquire or upgrade long-term assets that will provide benefits for more than one year. This fits the idea of buying an asset for several years, which is recorded as an asset on the balance sheet and depreciated over its useful life.

The other options describe different things: spending on day-to-day expenses is revenue expenditure, not a long-term asset; income from day-to-day sales is revenue (income), not expenditure; paying suppliers on credit relates to liabilities and cash flow, not the purchase of a long-term asset.