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Unit 5 P2
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Btec level 3 business unit 5
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Revenue and Capital expenditureCapital income is the amount of money invested in the business and there money is usually acquired to
set up the business including fixed assets. Fixed assets are the assets that are purchased and used for a
long time. They are used for long period of time therefore it will not be changed by the organisation
anytime soon or until it’s out of order. An individual or companies has the ability to make capital income
by purchasing stock and processing them to sell the finished product to gain profit. For example investors
get their capital income from their own saving, creating partnerships or by getting shares. Sole trader
business could get a loan, this is known as capital income, and they are more likely to use their own
personal assets.
Capital expenditure is incurred when a business spends money to buy fixed assets. Examples of capital expenditure
can be legal charges and replacement costs, long lasting items, good will of the business such as the name and
reputation, patents, trademarks, cars.
Revenue income is the money coming in on day-to-day basis from sales to your good and services. Revenu
Revenue expenditure is the money spent on the day-to-day basis to acquire stock, paying wages, rent, bi
Comparison
Revenue income is the revenue generated by a business by selling its goods or
services, plus various incomes such as interest received. Revenue expenditure,
on the other hand, is the cost of resources consumed or used up in the process of
generating revenue, generally referred to as expenses. Capital income is the cost
that be done when starting a business whereas capital expenditure is when you
buy raw materials that are needed such as machines.
Businesses want to exploit revenue income but reduce revenue expenditure. This
is because revenue income is the money flowing into the business after selling
goods or services however revenue expenditure is the outflow of money to cover
its day-to-day costs. Example of revenue income could be selling products to
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