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Identify and evaluate costs involved in the purchase of business assets.

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Introduction

AO5 Identify and evaluate costs involved in the purchase of business assets. Month Month Month Month Month Month Receipts 1 2 3 4 5 6 Capitol 15000 Sales (France) 360 360 720 540 550 Sale (UK) 605 630 1010 1025 1200 1290 Total Receipt 15605 990 1370 1745 1740 1840 Payments Raw material France 190 190 380 285 290 187.5 Raw material UK 247.5 255 415 417.5 490 525 Electric 65 65 65 65 65 65 Garage 75 75 75 75 75 75 Advertising 50 50 50 Ferry fee 50 50 50 50 50 50 Wages 400 400 500 500 500 500 Car boot 40 40 40 40 40 40 Van expenses 30 30 30 30 30 30 Building cost 6500 Lighting cost 3500 Van 2000 Potter wheel 1118 Equipment 1200 Total payment 15466 1105 1605 1463 1540 1523 Net cash flow p/m 139.5 -115 -235 282.5 200 317.5 Opening balance 0 139.5 24.5 -210.5 72 272 Closing balance 139.5 24.5 -210.5 72 272 589.5 Sue has spent a lot of money on assets in total she has spent a lump sum of �14318 She has spent this sum on: 1. Building costs �6500. She needs this in order to store and produce her pots 2. Kiln cost �3500. This is needed in order to produce her pottery. 3. Van �2000. The van is needed so she can make deliveries also pick up her materials. 4. Pottery wheel �1118. ...read more.

Middle

Sue will have to look after the kiln and other machinery like she owned them because she might have top pay extra money if any item is damaged. Loan A loan is a type of debt. Like all debt instruments a loan entails the owner of financial assets over time between the ' and the '. The borrower initially receives an amount of money from the lender, which they pay back, usually but not always in regular instalments to the lender. This service is generally provided at a cost, referred to as interest on the debt. The advantages of using a loan for the costs of the business are: * The amount is provided up front and in one go so the business can but what ever they like straight away. * The amount of money borrowed is spread out over a number of years. So Sue can be more relaxed and not worry about paying it off in a hurry. The disadvantage of using a loan for the cost of the business is: * There is no guarantee that the business would be able to pay back the amount borrowed. * Interest at a certain percentage is added. * There is more money that has to be paid back then borrowed. LOAN LEASE Building costs * Building costs can not be leased so loan is best suited. ...read more.

Conclusion

-�339.49 Opening balance �0.00 �13,800.51 �13,028.52 �12,136.53 �11,762.04 �11,305.05 Closing balance �13,800.51 �13,028.52 �12,136.53 �11,762.04 �11,305.05 �10,965.56 As you can see that loan has been spread out over 2 years and each month is paying 532 pound also by leasing the van this cost us 124.99 pound a month. This saves us 10,000 pound year as shown in the highlighted box. With the �10,000 she can invest this in the bank and gain interest for the money invested. 1 2 3 4 5 6 RECIEPTS Capital �5,000.00 Sales(France) �0.00 �360.00 �360.00 �720.00 �540.00 �550.00 Sales(UK) �605.00 �630.00 �1,010.00 �1,025.00 �1,200.00 �1,290.00 Total Receipts �5,605.00 �990.00 �1,370.00 �1,745.00 �1,740.00 �1,840.00 PAYMENTS Raw Materials(France) �190.00 �190.00 �380.00 �285.00 �290.00 �187.50 Raw Materials(UK) �247.50 �255.00 �415.00 �417.50 �490.00 �525.00 Electricity �65.00 �65.00 �65.00 �65.00 �65.00 �65.00 Rent for garage �75.00 �75.00 �75.00 �75.00 �75.00 �75.00 Advertising �50.00 �0.00 �50.00 �0.00 �0.00 �50.00 Ferry Fees �50.00 �50.00 �50.00 �50.00 �50.00 �50.00 Sues Other Wages �400.00 �400.00 �500.00 �500.00 �500.00 �500.00 Car boot fees �40.00 �40.00 �40.00 �40.00 �40.00 �40.00 Van running expenses �30.00 �30.00 �30.00 �30.00 �30.00 �30.00 loan �532.00 �532.00 �532.00 �532.00 �532.00 �532.00 Small Van �124.99 �124.99 �124.99 �124.99 �124.99 �124.99 Total Payments �1,804.49 �1,761.99 �2,261.99 �2,119.49 �2,196.99 �2,179.49 Net Cash Flow Per Month �3,800.51 -�771.99 -�891.99 -�374.49 -�456.99 -�339.49 Opening balance �0.00 �3,800.51 �3,028.52 �2,136.53 �1,762.04 �1,305.05 Closing balance �3,800.51 �3,028.52 �2,136.53 �1,762.04 �1,305.05 �965.56 ?? ?? ?? ?? Umar Hussain ...read more.

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