Capital addition definition
/What is a Capital Addition?
A capital addition is any investment that improves upon an existing fixed asset or adds a new fixed asset. In essence, capital additions increase the fixed asset base of an organization. Capital additions that involve existing assets must either extend the useful life of an asset or increase its capacity; otherwise, these expenditures are really just maintenance expenditures that are charged to expense as incurred.
Related AccountingTools Courses
Advantages of Capital Additions
A well thought-out capital addition should enhance the competitive positioning and/or profitability of a business. For example, an addition that increases the productive capacity of a bottleneck operation should increase the overall throughput of an organization, which directly increases its profits.