C3 Types Of Expinditure

Question 1

What is expenditure?

Answer 1

Money spent by a business and can be split into two categories

Question 2

What are the 2 types of expenditure?

Answer 2

Capital expenditure
Revenue expenditure

Question 3

What is capital expenditure?

Answer 3

Used to buy, alter, or improve capital items! It is not charged to the statement of comprehensive income

Question 4

What are capital items?

Answer 4

Asserts that will stay in the business for a long time and are non-current assets and intangible assets however it is written off overtime as depreciation

Question 5

What are non-current assets?

Answer 5

Items opened by a business that will stay in the business for a reasonable time period!they are shown on a business.s statement of financial position. They are sometimes referred to as tangible assets because they can be touched

Question 6

What are some examples of a non-current asset?

Answer 6

Land and premises
Machinery and equipment
Wechiles
Fixtures and fittings

Question 7

Why might non-current assets depreciate?

Answer 7

New tech comes along
Wear and tear

Question 8

What are tangible assets?

Answer 8

Something owned by the business that cannot but touched but adds value to the business

Question 9

What are 4 common tangible assets?

Answer 9

Goodwill
Patents
Trademarks
Brand names

Question 10

What is goodwill?

Answer 10

When buying an existing business its name and reputation will already be known it may already have an established customer base or set clinets. It increases the value and therefore increases the selling price

Question 11

What does goodwill do?

Answer 11

A sum of money added to the value of the business to reflect the value of this goodwill. However it is difficult to place a figure on

Question 12

What is patent?

Answer 12

A legal protection of an invention, such as unique feature of product or a new process.
It allows protection to stop others from complying the idea to exploit in the future by launching a a premium selling price.
It must be worth something

Question 13

What are trademarks?

Answer 13

A symbol, logo, brand name, words or even colour that set apart a business from it competitors
It is a key influence on consumer choice and build a strong brand loyalty
It is recorded as an intangible asset

Question 14

What are brand names?

Answer 14

A feature of the business that is recognised by customers and distinguishes a business from competitors
A brand name is a promise of what to expect
Link the brand to expectations from past experiences

Question 15

What is Revenue expenditure?

Answer 15

Spending on items on a day-to-day or regular basis
Expenses incurred by a business that are shown on the statement of comprehensive income

Question 16

What is inventory?

Answer 16

Most businesses providing a good or service will require some sort of inventory no matter what they are selling to customers
They will have to pay in cash as a starting business as they are not trustworthy, as they become more established it may be able to buy on credit

Question 17

What is rent?

Answer 17

The cost of using premises not owned by a business, regular payments, usually monthly

Question 18

What are rates?

Answer 18

Similar to council tax that is payed by the residents, businesses pay non-domestic rates.
A sum of money paid to the local council to go towards services.
It’s not a set amount , but it is calculated by the council based on the size and location of the premises

Question 19

What is heating and lighting?

Answer 19

Covers payments for services such as gas and electricity.
The business will receive regular bills for the use of services

Question 20

What is water?

Answer 20

A payment for the supply of water to the premises and use of water, this could be a fixed rate or based on the usage within a period of time

Question 21

What is insurance?

Answer 21

A business is legal,y required to take out a number of types of insurance to protect itself from the possibility of serious loss

Question 22

What is building insurance?

Answer 22

To protect the physical building from damage that may be caused by events such as fire

Question 23

What is contents insurance?

Answer 23

To protect what is inside the building in terms of machinery, fixtures and fittings and stock from damage

Question 24

What is public liability insurance?

Answer 24

To protect people within the building who may be harmed or injured

Question 25

What is employers liability insurance?

Answer 25

To protect if the employee is injured at work, the business is protected against any claims for compensation or any legal costs incurred

Question 26

What is administration?

Answer 26

Paperwork that goes within a business either internally between employees or externally with suppliers and customers

Question 27

What are examples of administrative costs?

Answer 27

Postage
Printing and stationary
Business cards
Headed paper
Books

Question 28

What is a salary?

Answer 28

An annual figure paid to an employee divided into equal monthly payments

Question 29

What are wages?

Answer 29

An hourly rate paid to an employee, meaning their is a direct link between the number of hours worked and the amount of money laid

Question 30

What is marketing?

Answer 30

This covers a whole range of costs associated with attracting the customers and convincing them to make a purchase

Question 31

What are bank charges?

Answer 31

Generally free, banks charge businesses for each transaction that takes place

Question 32

What is interest paid?

Answer 32

If the business has a bank loan or a mortgage, then interest will be charged on this

Question 33

What is depreciation?

Answer 33

Assists lose value overtime.
A paper exercise by accountants to spread out the cost of a sweet to match the cost of an asset against the time it’s used.

Question 34

What is discount allowed?

Answer 34

Reductions offered to customers are an expense to a business as it reduces the amount of cash flowing into the business

Question 35

What is the formula for depreciation?

Answer 35

Historical cost- resale value / no. Of years