What is typically included in a capital budget?

A capital budget is primarily focused on expenditures related to long-term projects and assets. This includes funds allocated for purchasing, upgrading, or maintaining fixed assets such as buildings, machinery, and equipment that are expected to provide benefits over a period extending beyond one year. Capital budgets are crucial for planning significant investments that impact an organization’s financial health over the long term.

This approach to budgeting is significantly different from the everyday operational costs, funding for employee benefits, or administrative overhead allocations, which are typically managed through operating budgets. These costs are part of regular operations and short-term plans, aiming to cover current expenses rather than investing in future growth and development. Thus, focusing on long-term financial commitments delineates the nature of a capital budget and underlines its importance in governmental financial planning and infrastructure development.