Intuit Academy Tax Practice Exam 2025 - Free Tax Practice Questions and Study Guide

Question: 1 / 400

Which of the following is an example of a capital expense?

Rent paid for office space

Purchasing new machinery for production

A capital expense is defined as a long-term investment in a physical asset that will benefit a business over time. The purchase of new machinery for production fits this definition perfectly, as it represents an investment in equipment that will likely enhance production capabilities and efficiency, providing value over multiple years.

This type of expense is typically recorded on the balance sheet and depreciated over its useful life, rather than being expensed in full during the year of purchase. This treatment contrasts with other listed examples: rent, salaries, and utilities are all considered operating expenses, which are costs associated with the day-to-day functioning of the business and are typically deducted in full in the year they are incurred. Thus, purchasing new machinery embodies the nature of capital expenditure.

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Salaries paid to employees

Utilities paid monthly

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