Capital Budgets

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Preparing a capital budget

Mei Po's capital budget

A capital budget is a schedule that shows planned investments in property, equipment, improvements, and other capital assets over a period of time. These outlays are different from ordinary day-to-day expenses in that they can be capitalized under accepted accounting practices. Instead of having to record the entire expense as a deduction from income in one accounting period, the capitalized expense is spread out over a period of years. Each year, a portion of the capitalized expense is recorded as depreciation.

If you are asked to submit a capital budget request, you will need to estimate the total expenditure associated with each type of investment. For example, you might have one line item for computers, one for office equipment, and another for furniture. Your budget should also include amounts for related costs such as installation charges, consulting fees, the cost of permits, or service contracts.

A capital budget may show planned investments over several years. The following example illustrates a capital budget for a department that is migrating to a new computer system in Year 1. The budget shows migration costs expected to be incurred in Year 1, and estimated costs in subsequent years based on projected growth.

Example of a Capital Budget

Year 1

Year 2

Year 3

IT Equipment:









Support Service




Furniture & Fixtures:

Office furniture




Renovation costs




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