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.

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