Capital Project
Martha Mireles
HCS/571
February 11, 2013
Janine Lewis

Capital Project

“A capital expenditure is a commitment of resources that is expected to provide benefits during a reasonably long period, at least two or more years” (Cleverly & Cameron, 2007, p. 397). Sometimes it can be difficult to determine the difference between a capital expenditure and a routine expense. A capital expenditure improves the value of the asset, whereas a routine expense is used for maintenance of that asset. For example, installation of a new bathroom in a rental is a capital expenditure, because it increases the value of the rental. Repairing the stove, however, is a routine expense designed to keep the rental in operating condition. The main goal of a capital purchase is that the lifetime of that product will extend beyond the year of purchase. After purchased the product is called a capital asset. Capital assets are all tangible property which cannot easily be converted into cash and which is usually held for a long period, including real estate, equipment, etc. (Finkler, Kovner, Jones, 2007). Capital assets and money used to purchase such items are treated differently than that of the operating budget. The operating budget is money being used and tangible at the time. Capital assets may cost money now, yet you may not profit from them until another period of time. The key to a good capital purchase knows the life of the product. This can help you choose whether a new product should be purchased or a refurbished product or if the product should be leased. Capital assets are usually equipment used to replace old equipment or new equipment in which studies have shown could improve the business. In healthcare the business is quality patient care. So in healthcare a capital purchase would be something in which improves quality patient care.