How to calculate capital expenditure from a balance sheet

Written by stephen byron cooper Google
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How to calculate capital expenditure from a balance sheet
Capital expenditure only examines the cost of purchasing fixed assets, not working capital. (Comstock/Comstock/Getty Images)

You can calculate capital expenditure for a year from a balance sheet, but only if you have the previous year’s balance sheet. The balance sheet shows the total value held in the company since it began. It does not show only the expenditure for one year. The profit and loss account shows all transactions that occurred in the previous year. If the balance sheet does not show sufficient detail, you may also need to take some figures from the accompanying P&L.

Skill level:
Moderately Easy

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Instructions

  1. 1

    Look for the figure for Property Plant and Equipment on the balance sheet. This is the figure that is most relevant for Capital expenditure. Although money to keep the company ticking over is called “working capital,” the concept of “capital expenditure” concerns itself only with the outlay made to acquire fixed assets.

  2. 2

    Find the previous year’s financial statements for the company and look up its "Property, Plant and Equipment" figure for that year. Subtract the previous year’s PPE from the current year’s PPE to get the change in value of fixed assets over the year under examination.

  3. 3

    Find the depreciation value. You should find a figure for accumulated depreciation on the balance sheet. Look for the same figure in the previous year’s balance sheet. Subtract the previous year’s accumulated depreciation from the current year’s accumulated depreciation to get the current year’s depreciation figure.

  4. 4

    Look at the P&L if the balance sheet does not list cumulative appreciation. This is not always available on the balance sheet. It is described on the profit and loss account on a line headed “Depreciation and amortisation.”

  5. 5

    Write out your findings to clearly express the way you arrived at your current year’s capital expenditure. Capital expenditure in one year is expressed as current PPE – previous PPE + depreciation. Substitute the figures you researched to present your findings on capital expenditure.

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