P2 - Definitions
Capital Income: This is the net worth of a business. It’s the amount in which assets exceed liabilities. It’s the income that comes from capital, which means it’s coming directly from the government itself, rather than any specific production or direct work. Capital income includes stock dividends or any sort of capital gains, as well as income an owner gets from a business they own.
Sole traders: If you’re self-employed then it means you work for yourself, and not for an employer. A sole-trader is a self-employed person and they are the sole owner of their business.
Partners: Partners are people who have shares within businesses. This means they don’t solely own the ...view middle of the document...
Some companies receive revenue from interest, royalties, or other fees.
1) In general, a transaction between two parties where the buyer receives goods (tangible or intangible), services and/or assets in exchange for money.
2) An agreement between a buyer and seller on the price of a security.
Rent received: This means someone owns a property, and they decide to allow others to live there with a cost, generally a monthly fee. Rent received now means that the tenant of the house pays money to the owner to live there.
Commission received: An agreed upon or fixed by custom or law fee generally with an agent, broker, or salesperson for facilitating, initiating, and/or executing a commercial transaction.
Explain the difference between Capital and revenue income:
Capital income is the net worth of a business whereas is revenue income is where an owner’s equity is increased from operations and other activities from a business.
Fixed Assets: Fixed assets are purchased for long-term use and aren’t likely to be converted quickly into cash, such as land, buildings, and equipment.
Land and buildings: The land is just the area used by a business for its premises and for its business functions and operations. The buildings are just the premises.
Office equipment: This includes printers, fax machines, computers etc...
Machinery: This can be things like big factory equipment such as fork lift truck, cement mixers...