Which of the following is an example of a Capital Expenditure for a private healthcare facility?

Capital Expenditure (CapEx) refers to significant investments in long-term physical assets that a company will use for more than one accounting period. An MRI machine is a major piece of medical equipment with a long useful life, representing a substantial investment intended to generate future economic benefits for the healthcare facility. Therefore, its purchase is classified as CapEx and recorded on the balance sheet as an asset. In contrast, operational expenditures (OpEx) are the day-to-day costs of running the business, such as salaries, consumables, and medicine, which are expensed in the period they are incurred.

B. Nurse’s Salary: This is a recurring labour cost for daily operations and is classified as an operational expenditure (OpEx), not a long-term asset purchase.

C. Cleaning Products: These are consumable goods used for routine maintenance and are considered a day-to-day operational expense (OpEx).

D. Medicine: This represents inventory or supplies consumed in the direct provision of healthcare services, making it a classic operational expense (OpEx).

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1. CIPS Official Course Book, Managing Budgets and Resources (L5M10), Profex Publishing, 2019. Chapter 1, Section 3.2, "Capital and revenue expenditure," explains that capital expenditure is used to acquire non-current assets like machinery, whereas revenue (operational) expenditure relates to day-to-day running costs like salaries and consumables.

2. Drury, C. (2018). Management and Cost Accounting (10th ed.). Cengage Learning EMEA. Chapter 2, "An introduction to cost terms and concepts," distinguishes between capital expenditure, which results in the acquisition of non-current assets, and revenue expenditure, which is incurred for the purpose of the trade of the business (e.g., wages, materials). An MRI machine is a non-current asset, while salaries and supplies are revenue expenditures.

3. Atrill, P., & McLaney, E. (2018). Accounting and Finance for Non-Specialists (11th ed.). Pearson. Chapter 3, "The Statement of Financial Position," pp. 74-75, defines non-current assets (the result of CapEx) as assets acquired for use within the business on a continuing basis, such as machinery. It contrasts this with current assets like inventory (medicine) and expenses like wages.