business

OPEX vs CAPEX – What is the difference?

I had a conversation with a small business last week about the difference between OPEX and CAPEX. They had recently purchased new technology/equipment and hired a firm to manage their new technology.

The business owner was wondering if he could write off the full amount of the purchase. We had a quick conversation about the difference and how these items were going to be recorded on the books.

➡️ OPEX is your day-to-day expenses that keep your business running. These items are reported on your profit and loss statement.
In this example, this is where the expenses to manage the technology.

➡️ CAPEX is funds used by a company to acquire, upgrade, and maintain physical assets such as property, plants, buildings, technology, or equipment. These items will show up on your balance sheet. The purchase of the new hardware and software would be put on the balance sheet and then depreciated over the years.