For this piece of work I will be explain the differences between capital and revenue and expenditure and income.
What is capital income?
Capital income is money that is invested in the business by the owners at the beginning of the business to purchase equipment, vehicles, property, opening stock or assesses (these can be referred to as Fixed Assets). This capital can come from bank loans, investors for a sole trader or for a public limited company it comes in the form of selling shares.
For example; someone that is opening a new hair dressers may get a loan from a bank to be able to purchase their equipment and pay the rent on a property for a year, this would be a capital income.
What is revenue income?
Revenue income is money that comes from the sale of goods or services. It can also come from the payment received of rent, and commission on products.
For example; when a shoe store sells shoes they receive revenue income from every sale. And they will make a commission off every brand that they sell a product from.
What is capital expenditure?
Capital expenditure is the spending of money on assets that will benefit the business over time. This can be land or a building for the business, office equipment, machinery needed to make the products or furniture and fittings. However, capital expenditure’s are not always tangible things and can also be intangible in the form of patents, trademarks or goodwill which will help the company to be unique and in the long run make a profit.
For example; when opening a new restaurant you have to pay for your shop name to be trademarked as a form of capital expenditure, you will also need to buy tables, chairs and the kitchen’s cooking equipment.
What is revenue expenditure?
Revenue expenditure can also be referred to as operating cost; this is because it is the spending of money on things needed for the everyday running of the business and maintaining the business. Without these things the business will not be able to function; some revenue