L4 - Categorise Items Of Income And Expenditure Flashcards Preview

AAT L2 Processing Bookkeeping Transactions > L4 - Categorise Items Of Income And Expenditure > Flashcards

Flashcards in L4 - Categorise Items Of Income And Expenditure Deck (8)
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1
Q

Define

Capital income

A

This is income ‘borrowed’ by the business and invested in the business for the long term, or received by a business when it sells capital goods (Non-current assets) that it had previously bought for the use in the business.

2
Q

Capital income

A

> is required to,set up the business
may be necessary to introduce further capital from time to time to finance further expansion

Examples

  • capital invested by the owner (s)
  • loan from bank which is repayable over several years
  • income from the sale of plant or machinery
3
Q

Define

Capital expenditure

A

Expenditure which has long term effect on the profit making capacity of a business.

4
Q

Capital expenditure

A

Is the expenditure related to the acquisition of items that will be used in generating profit over several accounting periods; such items are known as ‘non-current assets’.

Examples

Purchase of business premises 
Machinery 
Plant and equipment 
Furniture and fittings 
Vehicles
5
Q

Define

Revenue income

A

Income earned by the business from its trading and non trading activities

6
Q

Revenue income

A

Examples

From the sale of goods or the provision of services

Rental income received from letting out property

Interest received from funds in band deposit account

7
Q

Define

Revenue expenditure

A

Expenditure which has short-term effect on the profit making capacity of a business

8
Q

Revenue expenditure

A

Often referred to as this costs and expenses incurred in running a business on a day-to-day basis

The business takes value, or draws benefit from revenue expenditure within one accounting period

Examples

  • Cost of materials purchased for the use in the process of manufacturing
  • Cost of goods purchased for resale
  • Expenditure incurred I’m paying expenses such as
    rent, rates, insurances, wages, salaries, heat and light and vehicle running costs