Computer hardware is a type of business expense. There are many different ways to categorize expenses, and computer hardware could fall into multiple categories. Here are a few possible expense categories for computer hardware:
A capital expenditure is an expense that is made to acquire or improve a long-term asset. Computer hardware is a long-term asset because it has a useful life of more than one year. Capital expenditures are recorded on the balance sheet as assets. Examples of capital expenditures include:
An operating expense is an expense that is incurred in the normal course of business. Operating expenses are recorded on the income statement. Examples of operating expenses include:
Depreciation is a method of allocating the cost of a long-term asset over its useful life. Depreciation expense is recorded on the income statement. Computer hardware is a long-term asset, so it is subject to depreciation. The depreciation expense for computer hardware will be different for each business, depending on the cost of the hardware, its expected useful life, and the depreciation method used.
Computer hardware can be classified as a capital expenditure, an operating expense, or a depreciation expense. The correct expense category for computer hardware will depend on the individual business and its accounting methods.