In this task I will explain the difference between capital and revenue items of expenditure and income
Capital income
Capital income is money coming into the business, but not necessarily from direct sales of products or services. Capital income is money that comes into the business but not as revenue from what the businesses main frame of making profit is. Zara’s capital income would be any loans that the business receives. Another form of capital income Zara receives is money that comes into the business from sales of shares. Sole trader’s capital investments is also another form of capital income.
Revenue income
Revenue income is money coming into the business from sales of goods or services. This is the form of revenue that the businesses main purpose for setting up is to make profit in this form of revenue income. Revenue income could also be from receiving payments loans given out with interest in return or money coming in from rent payments that come into the business. Zara’s main form of revenue income is from the sales of their clothing goods both online and in store.
Difference between capital and revenue income
The difference between capital and revenue income is that capital income is made from money that comes into the business but not from the direct method that the businesses main purpose of making profit is. For example a business’s main objective may be to make as many sales from a product as possible, the money that they receive from this is revenue income because it is money from sales of the goods. Capital income would be the money they receive from the loans they needed or from the sales of shares to partners.
Capital expenditure
Capital expenditure is money that comes out of the business to maintain or acquire needs for the business. Forms of capital expenditure Zara may use would be money that goes out of the business to expand,