What does a capital expenditure budget specifically track?

The capital expenditure budget specifically tracks the type and cost of non-current assets planned for purchase. Capital expenditures (often referred to as CapEx) involve investments in assets that will benefit a company over a longer time frame, such as property, plant, equipment, or significant upgrades to existing assets.

By establishing a capital expenditure budget, a business can strategically plan for large purchases, assess their impact on cash flow, and ensure that funding is adequately allocated for future growth and operational needs. This budget is crucial for financial planning as it directly influences long-term asset management and investment strategies.

In contrast, the ongoing expenses of day-to-day operations pertain to operational budgets, which cover routine costs like salaries, rent, and utilities. Variable costs of goods sold relate to the cost of production that varies with sales volume, which does not fall under capital expenditures. Similarly, the allocation of employee bonuses and incentives is more closely related to personnel budgeting and not to capital asset planning. Hence, tracking the type and cost of non-current assets is the primary focus of a capital expenditure budget.