This is the first assignment for Unit 5- Business Accounting. I achieved a DISTINCTION in this assignment and an overall grade of D*D*D* (highest grade possible) Please DO NOT copy, but please use it as a guide as it will help you pass. Good Luck with your course! (PLEASE TAKE A LOOK AT MY OTHER DO...
P2
Income
Capital income is the money generated by an asset; usually a business would
buy an asset to use it as part of the procedure of making the product. For
example, one of a cake shops assets would be an oven as it helps bake the cakes
ready to sell. But if they sold the oven the money made from this would be
known as capital income. Unlike revenue income; the name says it all really; it
revenue meaning the money generated from sales of goods or services that the
business provide. Capital income being selling the asset that helps finish the final
product and revenue income is the money made from selling the final product. In
the case of a cake shop; all the cakes and bakery products that they sell will
determine how much revenue income has been made. The revenue income for a
business is the most important because after all the products have been sold the
final figure consists of the total net income for the year.
At the end of the year each business has to fill out bank statements for that year;
this allows the business to review how well they have done overall, as well as
identify what areas they are strong in and which not so strong in. Both capital
and revenue income would have to be included in the income statements; this
document is only based upon the money generated into the business. Revenue
income would definitely go into the profit and loss account as the income from
sales of goods, it goes towards the total amount of gross profit which later costs
will be deducted from which gives you your net income. Capital income would
also go into the profit and loss account as it is money invested into the business
for things such as fixed assets with items such as premises and vehicles being
bought in order to kick-start the business. Making sure that the statements are
correct is very important as they allow a business to make better decisions as it
will give them a clearer and more accurate visual of how their business is
currently performing so if they see something they don’t like they can quickly
pounce on it and get it sorted.
Expenditure
Looking at revenue expenditure; this is expenses that are done in order to have
things that operate the business on a daily basis; this include salaries, a business
cannot function without staff and staff wont work for free will they? Office
supplies is another one; without office supplies the business wont be able to
work to its full capacity and some employees may not have the significant
equipment needed to work and make sales. Capital expenditure on the other
hand is all based on fixed assets. Things that will help improve the efficiency and
capacity of a business. This include land and vehicles. Compared to revenue
expenditure; the cost of these assets is fixed meaning that no matter what the
price of renting a piece of property for example will never change. Until an
employees salary who may get a raise. Overall; revenue expenditure is expenses
needed for a to operate and capital expenditure helps improve the business
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