Types of income- Capital income

Question 1

What is capital income?

Answer 1

The money invested by the owners that is used to set up a business or buy long term equipment. Used to buy things that are in the business for a long period of time, such as vehicles, or machinery. These are called fixed assets.

Question 2

Loans

Answer 2

A lump sum of money from a bank lent to the business for a particular purpose, such as to buy assets. This is to be re-payed over a set period of time.

Question 3

Mortgages

Answer 3

A large lump sum of money into the business for a specific purpose (to buy a premises). Normally a larger amount of money, payed back over a longer amount of time

Question 4

Shares

Answer 4

Investments by individuals into companies in return for a share of the profits (dividend)

Question 5

Owners capital

Answer 5

Money invested into the business from the owner’s personal savings. This money does not need to be paid back.

Question 6

Debentures

Answer 6

A repaid lump sum, normally paid back on a pre-agreed date. They are secured against an asset.