Question

Explain the difference between capital assets, capital investments, and capital budgeting.

Answer 1

Capital Assets are the type of asset which is useful for business for a long period of time and provide income and it is also called fixed asset. Capital assets can be tangible or intangible and moveable or immovable. For example machine , building etc. If in future any capital answer is being sold than it taxed under the head capital gain or loss.

Capital Investment : Capital investments are those kind of investments which is generate income over several years. When a business purchase any capital asset it is also type of capital investment because the reason behind to invest in capital asset is to get long term benefit. Such as a business purchase a machinery for $500000 so that they can produce for a long term and earn a good profit. So it is called capital investment.

Capital Budgeting is the decision process of budgeting where funds are investor in a project and return are expected over a long period.some of capital budgeting decisions may be buy land, building or plants etc. Capital budgeting decision is most important decision for a managment because funds are investor in high manner so if the decision is not well evaluated than it can harm business heavy.

The difference between three of them is that capital assets is the assets of the company which purpose is to provide long term benifit whereas capital investment is the investment process in which investment made from the cash or bank of the company capital expenditure is also part of capital investment and capital budgeting is a decision process of management where management evaluate different projects before make anu capital budget to them.