pending is normally irregular and for large amounts It is expected to generate

Pending is normally irregular and for large amounts

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pending is normally irregular and for large amounts. It is expected to generate long-term benefits: • maintenance • profitability • expansion • indirect purposes.
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12 Capital Expenditure and Revenue Expenditure Revenue expenditure is expenditure incurred in the running / management of the business . For example, the cost of petrol or diesel for cars is revenue expenditure. Other revenue expenditure: Maintenance of Fixed Assets; Administration of the business; Selling and distribution expenses. Revenue Expenditure is an expense in the Profit and Loss account (Income statement). It is important to classify these types of expenditure correctly in the accounting system. For example: if the cost of the car was shown as an expense in the Profit and Loss account, then the net profit would be reduced, meanwhile, the Balance Sheet would not show the car as a Fixed Asset. Revenue expenditure – regular spending on the day-to-day running of the business where the benefit is expected to last for only one specific accounting period. Capital Expenditure and Revenue Expenditure Capital Expenditure Revenue Expenditure Buildings cost of building cost of extension carriage on raw materials used the new building legal fees labour cost of own employees to build new premises installation of utilities in the new premises e.g. water and electricity. general maintenance Repairs redecoration Vehicles net cost, including any optional extras delivery costs number plates licence for the new vehicle any changes to the vehicle that increases its value. Fuel road licence painting company logo Insurance servicing and repairs Computers net cost installation and testing modifications, including memory upgrades, installation of special wiring cost of air conditioning staff training computer programmes (if the cost of such programmes is high) Discs printing paper Insurance low cost computer programmes
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13 Long, medium or short-term long-term sources cover a period of 5 or more years medium-term sources cover a period of between 1 – 5 years short-term sources cover a period of up to 1 year Borrowing Money Time frame Possible usage Short term Under 1 year Working capital Medium term 1-5 years Capital expenditure (vehicles, refurbishments etc) Long term Over 5 years Major capital expenditure (buildings, lands etc)
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14 How much finance can a business get? It depends on: The type of business Stage of development State of the economy For many businesses, the issue about where to get funds from for starting up, development and expansion can be crucial for the success of the business. It is important, therefore, that you understand the various sources of finance open to a business and are able to assess how appropriate these sources are in relation to the needs of the business.
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