Capex Vs Opex

Capex and Opex these two terms we come across regularly in our professional life and they have a lot of meaning behind them despite the short name. I bring up this post for everyone who came across these terms ever and want to know more about them.

Capex:-Capital Expenditures meant for future returns like purchasing Fixed Assets or adding value to the existing assets is called CAPEX. Also called as Capital Expenses, Capital itself means the money invested by the Proprietor for businessĀ  and expects return out of it. These expenses could not be fully deducted in the same accounting year in which they occurred. Examples of CAPEX are Investment on Machinery, Real Estate , Patents which grows beyond a Taxation Year.
Opex:-Operational Expenses are usually a welcome expense as these expenses are done to meet normal day to day Operational expenses of the company. Capex includes wages, Machinery Upgrades, maintenance, repair etc. and the reason I used welcome as these expenses are made to increase the throughput of a job and hence it is always welcome.

Opex or Capex which one is a Better Option?
In terms of cost effectiveness Capex is much preferred as compared to Opex the reason is well explained in the following example. If a company wants to establish a computer network in the premises rather than establishing it inclusive of cost of repair and maintenance and server installation means a Capex in Crores whereas the same purpose could be efficiently solved by an Opex of 1 Lac per annum by leasing it from a third party and investing few thousands in Operation and Maintenance. Hence Opex is preferred over capex.

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