How should an airport distinguish between capital budgeting and operating budgeting?

• A. Capital budgeting plans for long-term asset investments; operating budgeting covers ongoing expenses and staffing.
• B. Capital budgeting handles daily payroll; operating budgeting funds new terminals.
• C. They are the same and used interchangeably.
• D. Capital budgeting funds marketing campaigns.

Answer: (A)

Capital budgeting focuses on long-term asset investments, while operating budgeting covers ongoing expenses and staffing. In an airport, decisions about purchasing or building a new terminal, upgrading a baggage-handling system, or adding new runways are capital budgeting topics because they involve large, infrequent expenditures that create benefits over many years. The operating budget, by contrast, covers day-to-day costs needed to run the airport, such as salaries, utilities, routine maintenance, and security staffing.

So, funding for new terminals or major equipment is handled in capital budgeting, while daily payroll and ongoing operating costs belong in the operating budget. The claim that they’re the same or interchangeable is not correct, and marketing campaigns are typically treated as operating expenses rather than capital investments.