The costs for a revenue project are treated as direct cost on your company. So that diminishes your profits as shown on your profit & loss account.

In a capital project the costs are treated instead as an investment. This doesn't show on your profit and loss, but rather shows on your balance sheet as an application of funds. So where you had say an asset in the form of £1m cash, now you have an asset in the form of £1m (for example) new production plant.

You may imagine that both these come to the same thing in that money is spent, and indeed the Cash Flow statement will reflect this.

But it's important for the company and investors to differentiate between a pure cost (P&L) and an investment (Balance Sheet).

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