Capital budget definition

A capital budget is a plan for expenditures for fixed assets such as equipment and facilities. It may include acquisition costs, building costs, and major repair costs, beyond routine maintenance. A capital budget is a part of a comprehensive annual operating or business plan.

A business, for example, may plan for a certain amount for the repair and maintenance of a fleet of vehicles in its operating budget, but the purchase of new or additional vehicles, or retrofitting with new engines, etc., would be part of the capital budget.

A start-up business would have a capital budget for the acquisition of buildings, equipment, computers and other assets.

A capital budget differs from an operating budget in that most capital purchases are depreciated, instead of being expensed in the current year, plus capital purchases are typically financed with medium to long-term debt, instead of out of operating cash flows.