Why is Capital Budgeting Decision Important?

It is necessary to remember the difference between capital expenditure and revenue expenditure. While capital expenditure is incurred for recurring benefits for many years in future, revenue expenditure is made for one-time benefit or utility. Thus, long term nature of commitment of funds in fixed assets make capital budgets more complex compared to current or operating budget which are prepared for one year and are more concerned with short time allocation and accrual of funds committed to current asset management.