Cost and Financing in Open Schooling/Capital Costs/Capital and Operating Costs

The term operating costs refers to any expenditure on things whose value is used up within the same financial year. These are sometimes referred to as revenue costs because they are normally met by the income (or revenue) that a business earns in the current financial year. Operating costs can either be recurrent, such as staff salaries that must be paid every year, or non-recurrent, such as once-off payments for consultancy services or specialised advice.

By way of contrast, capital expenditure acquires or produces an asset whose value continues to be used (or consumed) over several financial years. Expenditure on the construction of an office building is a typical example of a capital cost for an ODL institution. Although the cost of constructing a new building is very substantial, its benefits (in terms of office accommodation for the institution’s staff) are used over the lifetime of the asset, which is typically forty to fifty years. Normally, capital expenditure is non-recurrent or recurs only after several years.