topic 4 income statement + sofp

• Revenue items arise from the everyday trading activities of the business and occur on a regular basis eg repair, renewals, redecoration and rent
• Capital items are medium to long term, namely spending on the acquisition and improvement of assets and receipts from the sale of assets
• Explain the difference between revenue and capital items - Revenue items arise from the everyday trading activities of a business and occur on a regular basis. Revenue items are entered into the income statement. Capital items are medium to long term namely spending on the acquisition and improvement of assets and receipts from the sale of assets and are entered in the SOFP
• Explain the purpose of an income statement and a SOFP - Income statement is looking at historical financial documents which shows the profit/loss made in the last 12 months. SOFP looks at the current financial position of a business to gain an understanding of future finances. This gives the business a broader understanding of trading activity with consideration of how assets, liabilities and capital have been accumulated to form the current financial position