Capital costs

Capital costs - purchases of significant capital equipment. The cost to the business of capital equipment is apportioned as depreciation in a profit analysis. Depreciation is a form of overhead or fixed cost that allows for the use / fall in value of assets that have a life of more than one production period. It is an allowance deducted from gross revenue each year so that all of the costs of producing an output in that year are set against all of the revenues produced in that year.