Capital Addition

DEFINITION of 'Capital Addition'

The cost involved for adding new assets or bettering existing assets within a business. Capital additions can take the form of adding new parts that could be reasonably expected to increase useful life or potential, and/or adding new assets to increase production.

Capital additions are not to be confused with repairs, which only maintain the life of an asset. Capital additions are expected to increase the life or productivity of an asset.

BREAKING DOWN 'Capital Addition'

Although the term is usually used in the cases above to describe capital investments in long-term assets within a company; capital addition is also used to describe the cost of improvements by a tax payer to personal property (particularly real estate).

In banking, "capital addition" is used to describe new investment of funds to the bank.

RELATED TERMS
  1. Capitalize

    An accounting method used to delay the recognition of expenses ...
  2. Replacement Cost

    The cost to replace the assets of a company or a property of ...
  3. Asset Condition Assessment

    A report outlining how an organization can manage capital assets ...
  4. Capital Gain

    1. An increase in the value of a capital asset (investment or ...
  5. Long-Term Assets

    1. The value of a company's property, equipment and other capital ...
  6. Capital Investment

    Funds invested in a firm or enterprise for the purposes of furthering ...
Related Articles
  1. Investing

    Understanding Capital Assets

    A capital asset is one that a company plans on owning for more than one year, and uses in the production of revenue.
  2. Investing

    Understanding Capital Investment

    Capital investment is a term that describes a company’s expenditures for long-term assets used in the operation of its business.
  3. Personal Finance

    Assessing Bank Assets: Are Your Savings Safe?

    Learn how to determine if your assets are safe or if your bank has spread itself too thin.
  4. Investing

    Explaining Capitalized Cost

    A capitalized cost is an expense associated with a fixed asset that is added to the basis of that asset and expensed over its depreciable life.
  5. Investing

    Explaining Cost Of Capital

    Cost of capital is the cost of funds used to finance a business.
  6. Managing Wealth

    What is a Real Asset?

    A real asset is a physical asset that has value.
  7. Managing Wealth

    What's an Asset?

    An asset is a resource with economic value.
  8. Managing Wealth

    Understanding Capital Gains

    Capital gain refers to the increase in value of a capital asset or an investment security upon sale. In other words, if you buy company stock, real estate or fine art and then sell it for more ...
  9. Investing

    Calculating Return on Net Assets

    Return on net assets measures a company’s financial performance.
  10. Managing Wealth

    Understanding the Capital Gains Tax

    A capital gains tax is imposed on the profits realized when an investor or corporation sells an asset for a higher price than its purchase price.
RELATED FAQS
  1. What is an adjusted cost basis and how is it calculated?

    Learn what adjusted cost basis is, how it is calculated, and why this metric is important for investors, business owners ... Read Answer >>
  2. Are stocks real assets?

    Learn why stocks are classified as financial assets, not real assets. Understand the properties that determine whether an ... Read Answer >>
  3. Which consumer goods do Americans buy the most of?

    Explore the various factors that influence estimations of a tangible asset's useful life, as well as standard estimations ... Read Answer >>
  4. What is the difference between current assets and fixed assets?

    Learn what current assets and fixed assets are, examples of current and non-current assets, and the differences between these ... Read Answer >>
  5. What does low working capital say about a company's financial prospects?

    Find out what it means when a company has low working capital, including how this metric is interpreted based on business ... Read Answer >>
  6. What types of assets and payments are recorded in the capital account?

    Read a brief overview of the definitions of the capital account, where it is used, and what types of assets and payments ... Read Answer >>
Hot Definitions
  1. Glass-Steagall Act

    An act the U.S. Congress passed in 1933 as the Banking Act, which prohibited commercial banks from participating in the investment ...
  2. Quantitative Trading

    Trading strategies based on quantitative analysis which rely on mathematical computations and number crunching to identify ...
  3. Bond Ladder

    A portfolio of fixed-income securities in which each security has a significantly different maturity date. The purpose of ...
  4. Duration

    A measure of the sensitivity of the price (the value of principal) of a fixed-income investment to a change in interest rates. ...
  5. Dove

    An economic policy advisor who promotes monetary policies that involve the maintenance of low interest rates, believing that ...
  6. Cyclical Stock

    An equity security whose price is affected by ups and downs in the overall economy. Cyclical stocks typically relate to companies ...
Trading Center