Difference between capital budgets and operating budgets?

an expenditure qualifies as a capital expenditure (CAPEX) or as an operating expense (OPEX) depends on what is purchased, what it is used for, and also upon the country's tax laws.

Tax authorities also have a say in what may be considered a capital expense.

·         Tax authorities specify which item categories appear on the balance sheet as capital assets. On the income statement, these items create a depreciation expense for each year of the asset's depreciable life. This lowers reported income , thereby creating a tax savings.

• Tax authorities determine which expenditures for business start up cost, for instance, can be capitalized. In the India and a few other countries, the costs of professional services (for instance systems integrations services) can, under some conditions be "bundled" into the full capital costs of acquiring assets (for example, a large IT system).

Operating budgets, by contrast, cover operating expenses (OPEX), spending on predictable, repeatable costs for items or services that are not registered as capital assets and are not depreciated. This means the company charges the full amount against income during that reporting period, taking all tax savings for these expenses during that period.

Operating expenses typically represent spending for such things as:

• Office space rental and utilities costs

• Electricity bills

• Telephone and internet services
• Employee salaries/wages and overhead    
• Employee travel and training expenses
• Insurance costs
• Outside consultant fees
• Marketing communication / advertising expenses