What is Capital cost?

Capital cost (Definition)

To buy a new asset or add value to an existing asset that will last for more than one tax year, a business must spend money, use collateral, or take on debt. This is called a capital cost. Essentially, capital costs are one-time expenses paid for things used in the production of goods or service. A good example of a capital costs is the purchase of fixed assets, like new buildings or business tools. It could also include the costs of intangible assets, like patents and other forms of technology. Plant and machinery purchases are other examples of capital costs. Capital costs are fixed, so they don't change with the level of output. Capital costs aren't shown on a company's income statement, but they are shown on the balance sheet.