Capital equipment is generally defined as an asset with an acquisition cost that exceeds a set amount. To be a capital asset, the item must also have a lifespan of more than a year. The items typically are also required to perform or assist in producing a product, selling a product, or providing a service. Different institutions and companies may adjust the definition and acquisition costs to fit meet their needs.

Capital equipment can include items that acquired in a number of ways. The assets can be purchased, leased, or donated. There are some items that may appear to meet the general requirements but are generally excluded from the category. These typically include land and software.

Items that are included vary from industry to industry and business to business. In educational facilities, capital equipment may include computers, x-ray machines, and microscopes. In the mining industry, items in this category could include drills, sifters, or cargo containers.

Record maintenance is generally considered an important part of capital equipment accountability procedures. In the US, records are used to ensure that federal regulations regarding the assets are met. Accurate inventory is one type of paperwork that the government generally requires. For this reason and due to possible tax implications, disposing of capital equipment is often a matter of strict procedure.

Many of the items in this category can cost tens of thousands or millions of US Dollars (USD). To maintain warranties and to qualify for insurance, various types of paperwork must usually be available and up-to-date. Records are also important to assess performance and to calculate cost versus value.

Capital equipment can have a negative or positive effect on a company’s profits. If too much money is spent acquiring and maintaining these items, then profits can be reduced. Items listed in this category are often essential to the execution of a company’s business. It is usually a good idea for companies to consider more than price when considering which capital equipment they will obtain. Factors such as capacity and durability should also weigh heavily, otherwise excessive losses could occur.

If quality capital equipment is obtained and it is used efficiently, these assets can drastically boost profits. Fewer repairs and less maintenance prevent losses from situations such as idled production. When equipment is kept and used for longer periods instead of being upgraded for newer versions, it is also likely to add to profits, as long as it is still operating up to par.