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Unit 5 Business accounting P2
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Unit 5 Business accounting P2 PASSED
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Reezi Unit 5 P2 Group BP2 - Explain the difference between capital and revenue items of expenditure and income.
Revenue is the amount of money the company receives from the sales they make from their
goods and services. The revenue is usually shown at the top of the income statement where
all costs, expenses and charges are subtracted for the net income. Whereas the expenditure
is the money that is spent to buy a good or service. For example, a company can buy a
vehicle, that could be used as transportation for them.
Capital expenditure - Is the money that is spent on both fixed and intangible assets. These
assets will be needed by the business for a long period of time. The fixed assets would be
the building, land, machinery and vehicles. For KSB accountancy it would be the office and
equipment like computers. The intangible assets is something that is owned by the company
but can’t be touched but it can add value to the business, example of this can be goodwill,
patents and trademarks.
Capital income - Is the money that is invested by the owners that can allow the business to
set up or even buy extra equipment (fixed assets). Capital income can be selling shares, this
is when the business sells shares, so the shareholder will be owners of the company. They
will be rewarded for their investment by getting shares from the business profits. This can
depend on the amount of shares they invested on. Another one can be partnership
investment, this is when both businesses will both contribute together for capital income.
Revenue expenditure - Would be the items that the business needs in order to run, so they
will have to pay money on a day to day, weekly or yearly basis. These are items that the
business needs for the short term. For KSB accountancy it can be their staff costs, this being
salaries, wages, training or insurance. It can also be premises costs, this covers rent,
heating and electricity bills.
Revenue income - Is the money that comes to the business from selling goods and services
or for even providing the service. This can be from cash sales, rent and commision received.
Cash sale is when business has something that can be sold and payment it made
immediate. Rent received can be when the money someone can get if they rent out their
equipment, they can be received payment on a weekly or monthly basis.
Expenditure Income
Capital -Fixed assets -Money from sales of share
-Purchase of machinery or -Loans
vehicle -Sole trader investment
-Expansion of factory -Partnership investment -
Office equipment Mortgages
Revenue -Finance costs -Rent received
-Wages -Commission or royalties
-Utility bills received
-Raw materials -Salees
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