BUSINESS ACCOUNTING P2 - I will be explaining the difference between the capital and revenue items of expenditure and income.

Capital expenditure is used to buy capital items which are assets that will stay in the business for over a period of time or more than one accounting year. Examples are vehicles and buildings.  

Capital expenditure is fixed assets that are intangible assets. Fixed assets means items of the value owned by the business that are likely to stay in the business for more than a year such as machinery.

Revenue expenditure is spending on items on a day-to-day or regular basis. This is known as expenses that are incurred by a business that shows the profit and loss account. The types of cost incurred change from business to business (B2B) but the common types are… premises cost such as heating and lighting, administrative cost such as small amount of equipment, staff cost such as salaries, selling & distributions cost and finance costs.

Capital Expenditure refers to the money spent by the business to buy the assets where as Revenue Expenditure refers to money spent by the business to buy goods for the resale. This means that capital expenditure is used to buy goods and services for the business and revenue expenditure is used on the goods and services of the resale.

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. The capital income is used to buy things that will stay in the business for a medium-to-long period of time such as vehicles or for premises or equipment which is known as fixed assets as well. However when setting up a business the capital income may also be used to buy the opening stocks for the company but as the business starts to develop the stock should be paid for by sales and income.

Revenue income is the money that comes into the business from performing and obtaining its day-to-day function by selling goods or providing a service. The nature of the revenue income depends on the activities that the business does to bring in money and their three main sources which are sales, rent received and commission received.