Capital Expenditures Top of Mind for Iowa Manufacturers

Iowa manufacturers are poised for growth in Q2 2023, according to the latest ABI Quarterly Business Survey. The survey reveals that 81% of respondents plan capital expenditures, a significant increase from Q1. Sales expansion is expected by 51% of respondents, up from 23% in Q1, while 67% predict stable workforce numbers.

ABI President, Mike Ralston, emphasizes the importance of capital expenditures for business success and future growth. Despite supply chain challenges, optimism for the remainder of 2023 remains high among Iowa manufacturers.

What is a capital expenditure?

According to the Corporate Finance Institute, “A capital expenditure (“capex” for short) is the payment with either cash or credit to purchase long-term physical or fixed assets used in a business's operations. The expenditures are capitalized on the balance sheet (i.e., not expensed directly on a company’s income statement) and are considered an investment by a company in expanding its business.”

Types of Capital Expenditure

Capital expenditures (CapEx) include investments in long-term assets. Common types are:

How are capital expenditures reported?

Capital expenditures appear as assets on the balance sheet. Their acquisition can be offset by cash, debt, or equity. As they're used, they're depreciated, with depreciation reported on both the income statement (as an expense) and the balance sheet (as a contra asset reducing net asset value).

If you are planning on a capital expenditure before your year-end close, reach out to us to ensure that you are taking advantage of all available tax strategies and complying with tax laws and regulations.