Summary
Summary Btec business Level 3 Unit 5 P2
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This well help you achieve the pass merit or distinction, it will help to very easily but please do not copy it
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P2 Capital and revenue Expenditure/Capital and revenue IncomeCapital Expenditure – Capital expenditure is the money spent on the fixed assets for
example the purchases of land, building, machinery, fixtures, office equipment etc. This is
recorded in the balanced sheet under the fixed assets heading. For example Regent College
is a business who will have capital expenditures because the business buy computers for the
teachers and for students, tables and chairs, they will also have to buy office equipment like
pen, pencil staples and hole puncher etc. this is a form of fixed assets and also this is called
capital expenditures and the money is going out of the business.
Revenue Expenditure – Revenue Expenditures is the money spent on the day to day
expenses for a business which will include wages and salaries, rent and rates, paying the
suppliers, insurance, electricity bills etc. In addition this is recorded in the cash flow forecast
called outflows and also in the profit and loss account in order to calculate the net profit.
For example Regent College also has revenue Expenditures because they will also have pay
the bills of electricity which may be high because people use computers in the college and
also they will have pay the gas bills which will also be high. They will also have to pay the
salaries to the teacher and the wages for the workers. They will also have to pay the tax to
the government, and even the rent or mortgage. These are all form of the revenue
expenditure. The following may also include in the revenue expenditure
Premises costs
Admin costs
Staff costs
Selling and distribution costs
Finance costs
Capital Income – Capital income means that the money is coming into the business
because by the form of loans, debentures, sales on fixed assets such as sales on land,
building, equipment etc. Capital Income is usually recorded in a form of inflows in the cash
flow forecast. It is also recorded in the balanced sheet as the long term liabilities. For
example Regent College who might have been receiving the money from the bank loan, or
they might have been borrowed the money from a friend or relatives.
Revenue Income – Revenue Income is the money being received by the business from
day to day activities with in the business examples may include the rent received, discount
received. This is normally recorded in the trading account where they increase gross profit.
For example for Regent College they might have been renting the sport hall for a day to a
charity to make some money and they might have been renting the classroom on Saturdays
for party and to make some money.
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