Types of Income

• Capital income is

  the money invested in the business by the owners or other investors that is used to set up the business or buy additional equipment. 
• Types of capital income: 

  Owners' funds or assets (sole traders & partnerships) 

  Shares  

  Loans 

  Mortgages  

  Debentures 
• Revenue income: 

  Revenue Income is the money that comes into the business from performing its day-to-day function – selling goods or providing a service. 
• Types of revenue income: 

  Sales revenue

  Rent Received  

  Commissioned received 

  Interest received (on a positive balance) 

  Discounts received (so they save more money e.g. Bulk / wholesale buy) 

   

   

   

   

   

   

   

   
• Owner's funds or assets (Sole traders & Partnerships) This is the capital where the owner has invested his own money back into the business itself
• Sales revenue

  The income received after providing a certain number of goods / services to its consumers
• Shares

  They are usually issued to shareholders who are a part of the business and will receive some money for being part of it
• Rent received  

  The business may charge and allow other people to use a small section of the area bought but they must pay (mutual agreed upon)
• Loans 

  Money lends to a business from a financial institute for the business to use as a large-scale investment which they have to pay in instalments including interest
• Mortgages 

  Money lends to a business for a long-term expensive purchase for typically real estate
• Debentures 

  Bonds which are given by large companies to be payed back with interest
• Discount received 

  Where suppliers or store men would lower the price and give you a discount for the overall purchase making you save money in the long term
• Interest received  

  Money that is earnt on a positive bank balance via interest
• Commission received 

  Where another business that you give your supply to sells your goods and you would receive a % of that income  
• Capital expenditure 

  Capital expenditure is the purchase of Fixed Assets, these are assets that are purchased for long-term use in the business (usually more than one year). These items appear on the statement of financial position (balance sheet) of the business. 
• Non-current assets Sometimes referred to as tangible assets (capable of being touched; discernible by the touch; material or substantial. real or actual, rather than imaginary or visionary: the tangible benefits of sunshine.) 

  • Buildings 
  • Machinery 
  • Vehicles 
  • Furniture 
  • Fixtures & fittings 
  • Computers 

   
• Intangible assets 

  • Something that is owned but cant be toutched, it adds value to the business (brand recognition, goodwill, and intellectual property like patents, trademarks, and copyrights.) 
  • Software (copyright) 
  • Brand name like Nike, Adidas 
  • Trademarks™ 
  •  
  • Patents 
  • Goodwill (the value a company gets from its brand, customer base and reputation associated with its intellectual property) 

   

   

   
• Types of revenue expenditure 

  • Inventory (stock of raw materials) 
  • Rent 
  • Rates 
  • Heating and Lighting 
  • Insurance 
  • Admin Costs 
  • Selling and distribution costs (Marketing and Advertising) 
  • Staff costs - (salaries – Per Annum and wages – hourly pay) 
  • Bank Charges 
  • Interest paid 
  • Depreciation - (Depreciation represents how much of the asset's value has been used up in any given period) 
  • Discounts allowed – bulk buy 

   

   

   
• Invoice discounting is Reductions offered to customers
• Peer to peer lending is One business person lending to another in return for interest payments
• Donations Voluntary is money given by charities or social entrepreneurs
• Grants is Lump sum money offered by government or other charitable organisations
• Trade credit is A period of 30 days to pay off your bill to suppliers
• Leasing is Renting equipment/assets on a monthly basis
• Hire purchase is Paying to use an asset in monthly instalments, paying off at the end
• Debt factoring is Selling on businesses debts to a debt collection company
• Venture capital is Investment from an experience entrepreneur like Dragons Den
• Mortgages is Long term loan for a property purchase
• Crowd funding is Attracting investment from a large number of people with small individual amounts
• Loans are Money from a bank/financial institution
• Owners capital is Money from the owner/savings
• RETAINED PROFIT is The part of the after-tax profits of a business that is not distributed to shareholders
• NET CURRENT ASSETS are Money within the business on a day to day basis
• SALE OF ASSETS is the method of Selling assets owned by the business
• Advantages of retained profit

  * No interest

  * No loss of ownership
• Advantage of Net Current Asset

  • Encourages business to be prudent
• Advantage of sale of assets:

  • No interest charges

  • Can mean disposing of asset no longer required
• Retained Profit Disadvantages

  • May be limited

  • Reduces reward to shareholders

  • Once used, not available
• Net Current Assets Disadvantages

  • Can put pressure on customers to pay more quickly
• Sale of assets

  • May receive less than value of assets