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Capital expenditures (CapEx) are when you spend money to buy, maintain, or improve assets that you plan to use for longer than a year. These can include tangible assets, such as equipment and property, and intangible assets, like patents or licenses. 

These expenses likely show up under the “Assets” section of your balance sheet, rather than appearing on your Profit & Loss statement.

While you may make a large initial investment in these assets, in your books, you spread out the cost over the asset’s useful life. For example, if you purchase a 10-year license for $100,000, you can depreciate (take a write-off) $10,000 each year.