Types of expenditure- revenue expenditure Flashcards
learning aim C
What is revenue expenditure?
Money spent on day-to-day items, or on a regular basis. This includes restocking shelves. Revenue income is shown on the profit and loss account of the business.
Give the 14 examples of revenue expenditure
Inventory, rent, rates, water, heating and lighting, insurance, administration, salaries, wages, marketing, bank charges, interest paid, depreciation, and discount allowed.
Inventory
Stocking up on products and supplies needed to perform a service. As the business grows, they may be able to drive the cost down as they buy in bulk.
Rent
Cost of using premises not owned by the business. This is normally paid on a monthly basis
Rates
Businesses must pay non-domestic rates, which is a sum of money paid to the local council to go towards services such as powering street lights. This sum is calculated from the size, location and nature of the business
Heating and Lighting
This covers payment for provision and use of services (gas and electricity), which are normally paid quarterly
Water
Payment for the supply of water to the premises, and the use of water. This can be a fixed rate, or can be measured depending on how much water used (water meter)
Insurance
A business must use insurance to protect from the possibility of serious losses
List the 4 types of insurance a business needs
Building insurance, Contents insurance, Public liability insurance, and Employers’ liability insurance
Describe building insurance
To protect the physical building from damage (fires)
Describe contents insurance
Protect the contents inside the building from damage (floods, fires). These contents include machinery, and stock.
Describe public liability insurance
To protect people within the building who may be harmed or injured in accidents
Describe employers’ liability insurance
If the employee is injured at work, the business is protected from any claims for compensation or any legal costs incurred.
Administration
Refers to the paperwork that goes on inside a business, internally or externally. Administration costs include items such as postage, printing, and stationary (business cards, headed paper, order books)
What is telephone charges
Cost of using the telephone
Line rental cost- paid quarterly in advance
Call charges- paid quarterly after use
Salaries
An annual figure paid to an employee, divided into equal monthly payments. The employee will have to pay further national insurance, and tax, meaning the amount they actually take home will be a little less
Wages
The hourly rate paid to the employee, meaning there is a direct link between the amount of hours worked, and the money paid.
Marketing
Whole range of costs associates with attracting and retaining customers, convincing them to make a purchase. Marketing costs include advertisement, promotional literature and events, and point of sale materials.
Bank charges
Banks charge businesses for each transaction that takes place (every time a cheque is paid in)
Interest paid
If the business has a bank loan or mortgage, they are required to pay interest, which is a percentage of the amount of money in the bank.
Depreciation
As assets lose value over time, depreciation is used to spread out the cost of an asset over its useful life.
Discounts allowed
This reduces the amount of cash flowing into the business by offering reduced prices on products, to attract customers, bulk purchases or to gain a competitive advantage
What are the 2 types of depreciation
straight line depreciation, and reducing balance depreciation
What is straight line depreciation
an asset is depreciated by a set amount each year
What is reducing balance depreciation
an asset is depreciated by a set percentage of its remaining value each year
