• Join over 1.2 million students every month
  • Accelerate your learning by 29%
  • Unlimited access from just £6.99 per month

Explain the difference between capital and revenue items of expenditure and income for a business.

Extracts from this document...

Introduction

´╗┐Unit 5 ? P2 Capital Income In FF the capital income will come from the investors that own FF(Future Fashion). Investor?s money is used to buy things that will stay in the business for a medium to long period of time ? FF?s premises, vehicles or equipment. These are called fixed assets. When FF sets up a business, Capital Income might also be used to buy opening stock, but as the business develops, stock should be paid for by sales income. The sources of capital income available to business owners are influenced by the type of Business. Sole trader: Sole traders are people who own a business by them self, they will have to find all the capital income for the business on their own by things such as personal loans. Sole Traders often invest their personal savings into a business or borrow from the bank using their personal assets, such as their house to secure a loan. Sole Traders take a big risk when they do this as they are ultimately responsible for the debts of the business. Being a sole trader can also limit the size of the business but all the profit made from the business can be kept by the sole trader. ...read more.

Middle

Capital Expenditure Expenditure is money spent by a business and can be split into two categories; capital expenditure and revenue expenditure. This is used to buy capital items, which are assets that will stay in the business for a long period of time. Capital items are fixed assets and intangible assets, as explained below. Revenue Income Revenue Income is the money that comes into the business from performing its day-to-day function which would be selling goods or providing a service. The nature of the revenue income depends on the activities that the business does to bring in money, sources of that can be; sales, rent received, commission received Trademarks: A trademark is a symbol, logo, brand name, words or even colour that sets apart one business?s goods or services from those of its competitors. FF?s logo is a key influence because it is very well known and can build brand loyalty. Commission Received: A business may sell products and services as an agent of another business. This will mean that they sell other business products on their behalf and for each sale they make a small percentage of the sale. This percentage is called commission. ...read more.

Conclusion

Marketing ? This covers a whole range of costs for FF associated with attracting the customer and convincing them to make a purchase. Possible marketing costs might include advertisements, promotional literature, promotional events, point of sale materials and so on. * Finance costs - FF do not operate on a cash-only basis ? they are likely to accept payments by cheque, card or direct bank transfer. They are likely to make payments in the same way. This means FF must have a bank account. Banks are also businesses and they too want to make a profit so they charge for their services. Finance costs to a business can include Bank charges (business charge for every transaction made) and Loan and mortgage interest (Banks charge interest on loans and Mortgage) * Purchase of stock ? FF will require stock as they are providing goods and services. When FF is first started up it is likely to buy stock with cash as it will not have built a reputation, but then when it gets more well known it may be able to buy stock in credit which FF can do now. Bigger and more established business may be able to drive the cost of stock when buying in larger quantities, there are other costs related to stock such as insurance and storage costs. ...read more.

The above preview is unformatted text

This student written piece of work is one of many that can be found in our AS and A Level Accounting & Financial Management section.

Found what you're looking for?

  • Start learning 29% faster today
  • 150,000+ documents available
  • Just £6.99 a month

Not the one? Search for your essay title...
  • Join over 1.2 million students every month
  • Accelerate your learning by 29%
  • Unlimited access from just £6.99 per month

See related essaysSee related essays

Related AS and A Level Accounting & Financial Management essays

  1. Sources Of Finance

    the business more money in the long term if the asset is borrowed for use in the every day activities of the business; this means that the asset will be continuously hired as it is an essential part of making the businesses a success by operating effectively.

  2. A2 Business CourseWork

    Any business will be looking to grow into a more powerful and bigger one each year to become a more dominant and profitable company. Growth can be done in a variety of ways, it may be expanding/increasing the number of outlets and customers, buying other business to do the same, or simply expanding into new markets and countries.

  1. finance for soletrader and partnership

    The share owners also do not have any right in the votes in the business. Ordinary shares are shares that represent the business ownership, when an individual buys shares in a company they become one of the owners and in a private limited company only.

  2. In this assignment I will be explaining in detail the importance of cash flow, ...

    The STOCK TURNOVER RATIO shows how many times over the business have sold the value of its stocks during the year. Stock turnover ratio is calculated as: Cost of goods sold / Stock = stock turnover ratio For Cadbury Schweppes: -4315000 / 825000 = Solvency Ratios Liquidity is how much

  1. Business Income and Expenditure

    Likewise, if the company struggles and make a loss then a profit to the business, the shareholders can lose. It can be maximised as already more people putting into the business and people can put more money into the business to get more shares.

  2. BUSINESS ACCOUNTING P2 - I will be explaining the difference between the capital and ...

    Capital income is the money that is invested by the owners or the investors that is used to set up a business or buy additional equipment for the company.

  1. Explain the difference between capital income, revenue income, capital expenditure and revenue expenditure.

    This is the amount of money that is being charged for the loan as a percentage of the amount that was borrowed. The interest rate a bank charge can be a fixed amount or may vary with changes in the economy.

  2. The difference between capital and revenue items of expenditure and income

    which are the owners of the business, they all contribute to the Capital Income; shareholder usually receive voting rights and the more shares they own, the better the ability to influence decision making. Shareholders are rewarded for their contribution towards the business by the payment of a dividend; this is a share of the profits.

  • Over 160,000 pieces
    of student written work
  • Annotated by
    experienced teachers
  • Ideas and feedback to
    improve your own work