additional financial terminology

Question 1

capital expenditure

Answer 1

money spent to acquire items in a business that will last for more than a year and may be used over and over again
such items are known as fixed items and include machinery, land, buildings, vehicles and equipment

Question 2

capital expenditure summary

Answer 2

money spent to acquire fixed assets in a business

Question 3

what are fixed assets needed for the purpose of

Answer 3

generating income for the business over the longer term

Question 4

what can most fixed assets be used for due to their high initial cost

Answer 4

as collateral (financial security pledged for repayment of a particular source of finance, such as bank loans)

Question 5

what are capital expenditures therefore intended towards

Answer 5

long term investments intended to assist business to succeed and grow
ex when a business purchases a van, this is seen as capital expenditure because the benefits accrued to the business from this will be spread over the long term

Question 6

revenue expenditure summary

Answer 6

money used in the day to day running of a business

Question 7

revenue expenditure

Answer 7

money spent on day to day running of a business
these payments or expenses include rent, wages, raw materials, insurance and fuel - they do not involve the purchase of longer-term, fixed assets
funds for revenue expenditure need to be available expenditure immediately to keep the business operational and should therefore provide instant benefits, unlike capital expenditure