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

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Introduction

Unit 5 P2 In this task I have been asked to explain the difference between capital income, revenue income, capital expenditure and revenue expenditure. Capital income Capitan income is money invested into the business to buy equipment. For example Future Fashion will invest money into their business to buy equipment such as hangers, clothes stands. These kinds of things will stay in Future Fashion for a long period therefore this means they are known as fixed assets which means items which will stay in the business for a long period of time. When Future first opened up their business they may have used capital income to but opening stock but as the business develops stock will then be paid for using sales income. Sole trader A sole trader is a business who owns a business on their own therefore Future Fashion is a sole trader business as an individual person owns it. Therefore Future Fashion has to find all their capital income from their own sources or personal loans. Mostly sole trader businesses invest their personal savings or borrow from the bank using their personal assets such as their house to secure the loan. For example Future Fashion may give their house to the bank to get a loan but this is a big risk for Future Fashion as they have to responsible for the debts of its business itself. ...read more.

Middle

Commission received- a business may sell products or services as an agent of another business. They sell product for another business and they get paid a percentage on that sale. This percentage is called commission. Capital expenditure Capital expenditure is items bought by the business for a long period of time. For example Future Fashion will buy desks, tills, stands and furniture for their business which will stay in their business for a long period of time. This will therefore be known as capital expenditure. Fixed assets Fixed assets are objects bought by the business and then will stay in the business for a long time. For example Future Fashion will buy objects for their business and then record those on their balance sheet the balance sheet will include equipment, furniture and fittings. These are referred as tangible assets as they cannot be touched. The balance sheet for Future Fashion can change very rarely as sometime object lose their value and don?t have importance so new objects need to be bought into the business. Intangibles Intangibles are something owned by the business therefore Future Fashion but they cannot touch it but adds value to Future Fashion. There are three intangibles which may exist in Future Fashion: Goodwill- is when you buy an existing business its name and reputation will already be known. ...read more.

Conclusion

Marketing- this covers a whole range of costs associated with attracting customers and convincing them to make a purchase. Finance costs Future fashion do not operate on cash basis they also accept payment by cheque, or direct bank transfer. This means future fashion will need a bank account. Finance cost to future fashion will include: Bank charges- the bank will charge future fashion each time a cheque is paid or written and whenever cash is deposited. Future fashion may offer them free banking for the first year as a marketing technique. Loan and mortgage interest- if future fashion will have a loan or a mortgage then they will have to pay an interest. Purchase stock Future fashion will have to purchase stock to keep their business up and running. For example as they are a clothing business they will need to purchase clothes. When future fashion first opened their business they had to pay for their stock with cash but as time goes by they can purchase stock on credit which means they can have the stick and pay 30 days later. If future fashion does well their suppliers will give them good deals on stock each time they make a purchase with them. ...read more.

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