Current Expenditures Definition
Current expenditures refer to short-term spending that is fully expensed in the fiscal period in which it is incurred. They are in contrast to capital expenditures, which refer to spending on long-term assets that are capitalized and amortized over their useful life. Examples of this type of expenditure include wages, salaries, raw material costs, and administrative expenses.
In accounting, treat current expenditures like other short-term expenses. They are fully expensed during the fiscal period they incur. Unlike capital expenditures, which are first recorded on the balance sheet as assets before hitting the income statement as amortization expenses, current expenditures are recorded directly on the income statement as expenses in the current fiscal period. Basically, if the capital outlay is invested in an asset that will last longer than one year, it is considered a capital expenditure and treated accordingly. On the other hand, if the capital outlay is invested in an asset that will last less than one year, it is considered a current expenditure.
Access our Complete Monthly Close Checklist to use when closing your company’s or your client’s monthly books.