UK Accounting Glossary
In a basic sense, capital goods are goods used for the purpose of producing other goods. Capital goods would include items such as industrial buildings, equipment, and heavy machinery. Capital goods also categorize office buildings, highways, and various government installations. The nominal value of capital goods is commonly known as “book value”. Capital goods may undergo capital improvement, which typically extends their life and increases their productivity. Depending on market forces and technological trends, companies may deplete their capital goods through the process of disinvestment. The number of new orders for capital goods is an important leading economic indicator. The aggregate of capital goods is a key determining factor of a country’s productive capacity. Thus, a significant loss or international transfer of capital goods may signal a substantial economic decline.
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This glossary post was last updated: 4th February 2020.