L4 - Categorise Items Of Income And Expenditure Flashcards
Define
Capital income
This is income ‘borrowed’ by the business and invested in the business for the long term, or received by a business when it sells capital goods (Non-current assets) that it had previously bought for the use in the business.
Capital income
> is required to,set up the business
may be necessary to introduce further capital from time to time to finance further expansion
Examples
- capital invested by the owner (s)
- loan from bank which is repayable over several years
- income from the sale of plant or machinery
Define
Capital expenditure
Expenditure which has long term effect on the profit making capacity of a business.
Capital expenditure
Is the expenditure related to the acquisition of items that will be used in generating profit over several accounting periods; such items are known as ‘non-current assets’.
Examples
Purchase of business premises Machinery Plant and equipment Furniture and fittings Vehicles
Define
Revenue income
Income earned by the business from its trading and non trading activities
Revenue income
Examples
From the sale of goods or the provision of services
Rental income received from letting out property
Interest received from funds in band deposit account
Define
Revenue expenditure
Expenditure which has short-term effect on the profit making capacity of a business
Revenue expenditure
Often referred to as this costs and expenses incurred in running a business on a day-to-day basis
The business takes value, or draws benefit from revenue expenditure within one accounting period
Examples
- Cost of materials purchased for the use in the process of manufacturing
- Cost of goods purchased for resale
- Expenditure incurred I’m paying expenses such as
rent, rates, insurances, wages, salaries, heat and light and vehicle running costs
