Unit 5: Business Accounting P2
P1
P2
Unit – 5 (Business Accounting)
BTEC National Diploma In Business Level 3
The Date
Your Name
Your Teacher
1
,Unit 5: Business Accounting P2
Unit 5 – Business Accounting
On completion of this unit I should:
1) Understand the purpose of accounting and the categorisation of business income and expenditure.
2) Be able to prepare a cash flow forecast.
3) Be able to prepare profit and loss accounts and balance sheet.
4) Be able to review business performance using simple ration analysis.
Task 1:
1. Explain the difference between capital and revenue items of expenditure and income.
Virgin Enterprise has now asked me to add a second session to your presentation. I am now to
explain clearly and in detail the difference between capital and revenue items of expenditure and
income.
2
, Unit 5: Business Accounting P2
computing income. These could be:
Capital and revenue
symbols, logos, brand name, words
To achieve its objectives, or even colour that sets apart one
the business must take business’s goods or services from
a clear distinction between those of its competitors.
its capital and revenue
items. The distinction Patents – A form of
between capital and revenue protection that provides a business
items is essential for their with exclusive rights for making,
correct treatment and using or selling a concept or
production of a business invention and excludes others from
accounts and financial doing the same for the duration of
statements. the patent. An entrepreneur or
business may patent their idea to
Revenue, Capital and Expenditure stop others from copying the idea.
o Revenue – is the amount of money that
are brought into a company by its
business activities. Goodwill – is an intangible asset that
o Capital – is the amount of cash and arises because of the acquisition of
other assets owned by a business. These one company by another business.
business assets include accounts The value of a company’s brand
receivable, equipment, and name, solid customer base, good
land/buildings of the business. customer relations, good employee
o Expenditure – is the act or a process of relations and any patents or
spending business fund. These founds proprietary technology represent
can be split into two categories: capital
goodwill.
expenditure and revenue
expenditures.
o Revenue expenditures – is spending
Revenue Expenditure and Capital
on items on a day-to-day or regular
Expenditure
basis. These are the expenses incurred
o Capital expenditure – this is used to
by a business that are shown on the
buy capital items, which are assets that
profit and loss account.
will stay in the business for a long
period (these are Fixed Assets) Examples of Revenue Expenditures
entrepreneurs can expect to incur:
o Fixed assets – are items owned by a
Premises costs: all business will
business that will remain in the business
have some sort of premises costs.
for a reasonable period of time e.g.:
1) Rent – the business may not
plant, equipment, furniture, vehicles,
own the premises and may
etc…
therefore have to pay a regular
Examples of Capital Expenditures sum of money for its use of the
entrepreneurs can expect to incur: premises.
2) Rates – Businesses pay non-
Trademarks – the costs of obtaining
domestic rates like council tax to
a trademark registration to protect a
the local authority.
trade name, design or product are
allowable as deductions in
3
P1
P2
Unit – 5 (Business Accounting)
BTEC National Diploma In Business Level 3
The Date
Your Name
Your Teacher
1
,Unit 5: Business Accounting P2
Unit 5 – Business Accounting
On completion of this unit I should:
1) Understand the purpose of accounting and the categorisation of business income and expenditure.
2) Be able to prepare a cash flow forecast.
3) Be able to prepare profit and loss accounts and balance sheet.
4) Be able to review business performance using simple ration analysis.
Task 1:
1. Explain the difference between capital and revenue items of expenditure and income.
Virgin Enterprise has now asked me to add a second session to your presentation. I am now to
explain clearly and in detail the difference between capital and revenue items of expenditure and
income.
2
, Unit 5: Business Accounting P2
computing income. These could be:
Capital and revenue
symbols, logos, brand name, words
To achieve its objectives, or even colour that sets apart one
the business must take business’s goods or services from
a clear distinction between those of its competitors.
its capital and revenue
items. The distinction Patents – A form of
between capital and revenue protection that provides a business
items is essential for their with exclusive rights for making,
correct treatment and using or selling a concept or
production of a business invention and excludes others from
accounts and financial doing the same for the duration of
statements. the patent. An entrepreneur or
business may patent their idea to
Revenue, Capital and Expenditure stop others from copying the idea.
o Revenue – is the amount of money that
are brought into a company by its
business activities. Goodwill – is an intangible asset that
o Capital – is the amount of cash and arises because of the acquisition of
other assets owned by a business. These one company by another business.
business assets include accounts The value of a company’s brand
receivable, equipment, and name, solid customer base, good
land/buildings of the business. customer relations, good employee
o Expenditure – is the act or a process of relations and any patents or
spending business fund. These founds proprietary technology represent
can be split into two categories: capital
goodwill.
expenditure and revenue
expenditures.
o Revenue expenditures – is spending
Revenue Expenditure and Capital
on items on a day-to-day or regular
Expenditure
basis. These are the expenses incurred
o Capital expenditure – this is used to
by a business that are shown on the
buy capital items, which are assets that
profit and loss account.
will stay in the business for a long
period (these are Fixed Assets) Examples of Revenue Expenditures
entrepreneurs can expect to incur:
o Fixed assets – are items owned by a
Premises costs: all business will
business that will remain in the business
have some sort of premises costs.
for a reasonable period of time e.g.:
1) Rent – the business may not
plant, equipment, furniture, vehicles,
own the premises and may
etc…
therefore have to pay a regular
Examples of Capital Expenditures sum of money for its use of the
entrepreneurs can expect to incur: premises.
2) Rates – Businesses pay non-
Trademarks – the costs of obtaining
domestic rates like council tax to
a trademark registration to protect a
the local authority.
trade name, design or product are
allowable as deductions in
3
