Why do capital expenditures increase assets (PP&E)?
while other cash outflows, like paying salary, taxes, etc., do not create any asset, and instead instantly create an expense on the income statement that reduces equity via retained earnings?
The Computer you operate daily is an example of PP&E (i.e. Property, Plant & Equipment), which as per accounting language is treated as an asset because it has a useful life of more than 1 year. Capital Expenditure means creation of Asset only. When a Capital Expenditure is incurred, it means that a Capital asset has been bought or created, which has a useful life of more than 1 year. Normal cash outflows like paying salary and taxes are called revenue expenses. No assets are bought or created by such expenses.
