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Revenue and expenditure
1. Capital income
The capital income isthe moneythat isusedto start up the businessanditcan come from a variety
of sources.Thismoneyiscommonlyusedforfixedassetsastheyare not goingtobe soldon.This
waythe investor’smoneystayswithinthe businesssuch ason vans,equipment.Thisavoidsconstant
replacement. There are differenttypesof capital incomes;
Sole Trader
Firstof all there are sole traders,a sole traderisan individual whoownsabusinessalone,andthey
are responsible forthe businessand usuallyinvesttheirpersonalsavings.The investmentscan
sometimesbe abigrisk.Howeverthe positive of beingasole traderisthat youcan choose to keep
all of the profitsforyourself.
Partnerships
There are alsopartnerships,thisiswhen2-30people choose tojointogetherandsetupthe
business.Eachof the partners is expectedtocontribute towardsthe capital incomeswhichwould
increase the potential forprofit,theyshare decisionmaking, andthe partnersownassetssecure
loanstakenout.
Shares
Finallythere are shareswhichare where abusinessisregisteredwiththe CompaniesHouse andhas
the optionto issuessharestoitsshareholders.All of these ownapart of the businessandusually
have the optionto vote towardsdecisionmaking,the more sharesowned,the largerthe vote.Asa
rewardfor theirinvestmentshareholdersare oftengivenapaymentinthe formof a dividend.
Loans and Mortgages
There are alsootherincomes,the firstof whichisloanswhichisan amountof moneythat the
businessborrowsandpaysbackat a laterdate.A mortgage can alsobe takenoutwhichisa loan
that lastsaround25 yearsandis usuallyalarge amountof money.
Capital expenditure
Capital expenditureisusedtopurchase assetswhichwill staywithinthe businessforalongtime.
These are knownas fixedassets.
Fixed Assets
Fixedassetsare the itemsownedbythe businessremaininginthe businessforalongperiodof time,
theyare showonthe businessesbalance sheet.Thesecaninclude thingsuch asland,buildings,
2. equipment,machinery,fittingsandvehicles.Overtime theseusuallylose value whichiscalled
depreciation.Sotoshowthis,the value isdecreasedeachyearonthe balance sheet.
Intangibles
There are alsointangibleswhichare thingsownedbythe businesswhichcannotbe modifiedbut
that add value tothe business.
Goodwill
One of these isgoodwill;thismeansif youbuyabusinessthatalreadyhasa good name,reputation
and customerbase thentheywill remainwhichtherefore addsvalue tothe business.A sumof
moneyisusuallyaddedtothe value torepresentthe goodwill value.Howeverthe limitationisthatit
cannot be easilyvaluated.
Patents and Trademarks
Anotherintangible is patents;thisisthe legal protectionof aproductsuch as copyrightandis usually
put onthingssuch as computerproductsand technology.Anexampleof thisisAdobe Photoshop
because thatis copyrighted.Howeverthisisn’tapplicable toyoursmoothie company. The final
intangible istrademarks,thisiswhatisactuallyputon the productssuch as symbolsandlogosand
by havingthemtrademarkedtheycannotbe usedbyothercompanies.Youmaywantto trademark
your smoothie productstopreventotherpeople orbusinessesfromusingyourproducts.
Revenue income
The revenue income isthe moneythatcomesintothe businessonaregularbasissuchas salesor
providingservicestocustomersandconsumers. These are usuallyreceivedonadailybasisand
increase eachtime a productor servicesissold.Thisisdependentonwhatthe businessdoestoget
moneyandthere are three mainsources.
Sales
Firstof all there are saleswhichisthe moneycominginfromthe salesof productsand services.So
each time yousell asmoothie thisfigure isgoingtoincrease.Salescaneitherbe acash sale which
meansthe customerspayimmediatelyorcreditsaleswhere theywouldpayata laterdate.You are
mostlikelytouse cash salesasit wouldbe uncommonforsomeone nottohave enoughmoneyto
pay fora smoothie incash.Youare likelytorecordthe dailyincome andthenlateryoucan forecast
the dailyincome.
Rent and Commission
Anotherrevenue income isthe rentreceived,thisiswhere asbusinessownspropertiesandrents
themout to otherstouse them,in returntheygetincome fromthis, andthe same appliesto
houses,landandoffices.Thisdoesnotapplyto you;however,youmayrentbuildingsfromone of
these companiesatfirst.The final formof revenue incomeiscommissionreceived.Thisiswhere a
3. businessmaysell anotherbusiness’sproductsactingasanagent or middle man.Bysellingthe
productson behalf of thatbusinesstheygetasmall portionof the income made onit whichiscalled
commission.Howeverthisdoesnotapplytoyoursmoothie businessunlessyou were goingtosell
the smoothie productsof anotherbusiness.
Revenue expenditure
The revenue expenditure isthe same asthe revenue income exceptitisspendingratherthan
receivingsothese are expendituresthatare made ona dailyor regularbasis.These caninclude
premisescosts,administrative costs,staff costs,sellingcosts,finance costsandthe cost of stock.
Premises costs
The premisescostsare what the businesshastomake regularlytooperate initsarea, these include
the rent,the rates,heatingandlightingandinsurance.Likelyratesare onessuchascouncil tax and
insurance needstobe purchasedforbuildings,contentsandpublicliability.
Administrative costs
There are alsoadministrative costs,thisreferstothe legal paperworkthathasto be carried outsuch
as accounts andtelephone charges, andyou have nochoice butto pay these because theyhave to
be done.
Staff costs
There are alsostaff costs,eventhough youare a sole traderyoucan still have staff aslongas you
can affordthem. Insteadof havinga few staff thatoperate all dayyou can have several staff which
operate inshifts,thishelpscutdowncostsforstaff.
The staff costs include the salaries,thisisanannual figure paidtoemployeesinmonthlypayments.
Thismoneyisthe amount receivedbefore taxessuchasNational Insurance,tax andpension
contributions.
Wageswhichis an hourly rate that staff getpaidwhichmeansmore workinghoursresultsinhigher
wagesoverall whereasthe salariesare unaffected.
Some staff mayneedtrainingsothe businesswill have topayfortrainingcosts,forexample a
securitycompanywill needtomake sure thattheiremployeesgetSIA licences.
Insurance isneededtomake sure thatthe businessisnotresponsibleforanyinjuriesonthe staff at
workand therefore theyneedtogetemployersliabilityinsurance meaningthatif an employeeis
injuredthentheyare notresponsibleforanyclaimsforcompensationoranylegal costs.
Finallythere are some pensions schemesthatbusinessesmaydecide toofferasan addedbonus.
Both the businessandemployeesregularlycontribute tothis. Forsomeone toadministerthiscost
the businessmayalsohave topay more money.
4. Selling and distributioncosts
There are sellinganddistributioncostswhichare necessaryforthe businesstooperate;the business
needstomake enoughsalestocoverthese costs.To do thistheymustbe able toattract enough
customersandbe able tomake sales.
Firstof all there are salesstaff salarieswhichiswhere abusinessemploysworkersforthe specific
task of makingsalessothismay be a salesrepresentative whotravelsandtriestoincrease sales.
There are alsosalesassistantsandaccountsmanagers.
There isthe carriage of sales,whichisthe cost of sellingthe productforexample havingtosend
packagesor mail containingthe producttothe customersandhome deliverieswhichwoulduse
vehicles.
There isalso marketingwhichcoversthe costsof attractingcustomersand convincingthemto
purchase items.
Finance costs
Finance costsare importantforthe businessastheyneedtobe able to receive moneyinvarious
formats,so the businesscanbe paidthoughcash,cheque,card or directtransfer.Banksmaycharge
to have thisservice availabletocustomers.Bankchargesare generallyfree forthe businesswhereas
loanand mortgage interestcanbe quite costlybutthe advantage of beinga businessis thatyoucan
receive offerstohave cheaperrepaymentsandinterestsbecausebanksare more confidentthat
businesseswillpayback.
Purchase of stock
Finallythere isthe purchase of stockwhichiswhere the stockis purchasedsothat itcan be sold.It
may be eitherrawmaterialsorthe finalisedproductswhichare readyto sell.Forexamplea
hairdresserwillneedproductssuchasshampoo.Itispossible topayfor stockon creditmeaningyou
pay laterwhichisusuallyaperiodof 30 days.Biggerbusinessescanreceivecheaperstockbybuying
inbulkamountsand payingbackearlierif purchasedoncredit.