A capital expenditure (CapEx) is the money companies use to buy or upgrade plant, equipment, computers, etc.[i] These types of assets have a life longer than a year, so this is considered a long-term asset. For these types of purchases, businesses often take out debt to cover the cost. Depreciation is associated with these longer-term assets. Deprecation is an accounting method that spreads the cost of an expensive asset over time.[ii] For example, say you buy a piece of machinery for $5,000. You estimate that the machine will last 5 years. On your accounting books, you can expense the $5,000 over five years instead of just one year. This will allow you to have a higher net income since you are expensing $1,000 a year over five years instead of $5,000 in year one.