Which term describes the amount invested to start up and operate a business, as indicated in the material?

• A. Nontaxable
• B. Taxable
• C. Depreciable
• D. Capital expenditure

Answer: (A)

The concept here is how investments used to start and run a business are categorized. The best term for funds used to acquire, upgrade, and maintain physical assets and to set up ongoing operations is capital expenditure. CapEx covers purchases or improvements of property, plant, and equipment that provide benefits over multiple periods. It’s different from operating costs, which are expensed in the period they’re incurred.

Depreciable describes a property’s attribute that allows its cost to be allocated over its useful life for tax and accounting purposes, not the overall amount invested. Nontaxable and taxable relate to tax treatment, not the measurement or classification of startup investments. So capital expenditure is the most appropriate term.