Lesson 11 Flashcards
(22 cards)
What is an expenditure by definition
The purchase of products, goods or services
What are examples of expenditures
Wages, Marketing, Products, Insurance
What are the 2 types of expenditure s
Capital and revenue expenditures
What is a capital expenditure
Spending income on “fixed assets”. These are items which will stay in the business for longer than a year
What are examples of capital expenditure
Premises, Buildings, Machinery
What is revenue expenditure
This is essentially the day-to-day spending to fund trading activities of the business
What are examples of revenue expenditure
Wages, Rent, Utility bills
What are non current assets
Non-current assets are assets and property owned by a business that are not easily converted to cash within a year
What are non current assets used for
Non-current assets are for long-term use by the business and are expected to help generate income
What are examples of non current assets
Vehicles, Buildings, Patents, Trademarks, Goodwill
What are patents
When a business pays to protects a unique feature of a product to stop it being copied
What is goodwill
This is an intangible asset when a business purchases another which transfers reputation and assets
What are trademarks
When a business pays to protect a unique characteristic of the business
What are current assets
This is an asset which is expected to be extinguished within the fiscal year
What are examples of current assets
Cash, stock inventories, trade receivables
What are current assets used for
They are converted to cash which aid s the business in the day-to-day running
What is depreciation
This is a paper based exercise that spreads the costs of an asset over its useful life
What a the 2 types of depreciation
Straight-Line depreciation and reducing balance
What is straight-line depreciation
spreads the cost of an asset evenly over the time it will be used, also known as its “useful life.”
What is the equation for straight-line depreciation
Value of the Asset - Residual Value
R-V (collectively) divided by Life Of Asset
What is reducing balance
This is the value of an asset decreasing by a fixed percentage over its useful life
What is the equation for reducing balance
Net Book Value × Depreciation Rate
When considering the residual value the equation is:
(Net Book Value - Residual Value) x Depreciation Rate
