Topic 3: Finance and accounts
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4 Terms
What is the role of finance for businesses?
Capital and revenue expenditure
Capital expenditure
Capital expenditure refers to investment spending on fixed assets, such as the purchase of machinery, equipment, land and buildings.
Reasons for capital / investment expenditure
To add extra production capacity as the business grows.
To improve efficiency by utilising the latest technologies, including IT' systems and production technologies.
To replace worn-out, damaged and/or obsolete (outdated) capital equipment and machinery.
To comply with changing legislation and regulations, such as green technologies.
Revenue expenditure
Revenue expenditure refers to spending on the day-to-day running of a business, such as payment of rent, wages, salaries, and utility bills.
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