Capital And Revenue Expenditure Flashcards
What is capital expenditure and what are the two types of assets
Assets the business plans to use over a long period of time
Non current (tangible) assets and intangible assets
Examples of non-current assets (tangible)
Land
Buildings and premises
Machinery and equipment
Vehicles
Fixtures and fittings
Examples of intangible assets
Goodwill
Patents
Trademarks
Brand names
What is goodwill
(Capital expenditure intangible)
Measure of the number of customers
What are patents
(Capital expenditure intangible)
When a business pays to protect a unique feature of a product to stop it being copied by a third party without permission
What are trademarks ?
(Capital expenditure intangible)
When a business pays to protect a unique characteristic of the business that separates it from competitors
eg logo
What is revenue expenditure
Day to day costs in running the business
Examples of revenue expenditure
Wages- hourly rate paid to an employee
Utility bills - such as water bills
What is reducing-balance depreciation
Shows the loss of value as being higher during the early years
What is straight-line depreciation
Reduces the value of an asset by the same amount each year
Asset purchase price = £300 000
Residual (resell) value = £20 000
Useful life = 5 years
Straight line depreciation =
(value of asset - residual value) divided by life of the asset
£300,000-£20,000=£280,000
£280,000 divided by 5=£56,000