A ~1-minute educational YouTube lecture by Bill Hanna, CPA, explaining the difference between capital expenditures (CapEx) and operating expenses (OpEx). CapEx are described as long-term investments (machinery, equipment, buildings, data centers) that are recorded as assets on the balance sheet and subsequently depreciated into the income statement. OpEx are day-to-day expenses (salaries, utilities, rent, marketing, cloud/cloud hosting) recorded directly on the income statement in the period incurred. The video ends with a brief CTA to subscribe for more finance content.
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Hey guys, Bill Hanna here, your favorite financial controller. Today we're talking about two simple words that we use in finance that have big implications on the financial statements. So we're talking about capital expenditure, capex or opex, which is short for operating expenses. So capex versus opex. So the difference between them is that with capex these are long term investments that we're making in the company, right? So we're buying a machinery, equipment, computers, building a factory or a data center like the case now with the companies that are building data centers for AI usage, right? So this is a CapEx capital expenditure versus OpEx. These are the day to day activities or expenditure of the business. So these are things like salaries, utilities, rent, marketing expenses, cloud hosting services with AWS and things like that that you need on a day to day basis to run the business. Now in terms of implications to the financial statements, with capex this is simply a balance sheet movement. So you're just moving cash into an asset, right? And that asset is going to be then depreciated in the future and the depreciation is going to land in the income statement that is with CapEx. With OpEx this simply gets recorded on the income statement as an operating expense in the period. So I hope that clarifies the difference between Capex and opex. If you want to learn more finance bytes from me, go ahead and subscribe to the channel. See you in the next one.
