forms of expenditure Flashcards
(17 cards)
forms of expenditure
the act of paying cash or by credit in return for goods or services.
revenue,capital,deferred
expenses definition
Recognizes the consumption(usage) of a cost
capital expenditure
buys an asset with a life expectancy of more than one year
assets
•Land or buildings.
•Plant and machinery.
•Equipment.
•Infrastructure (eg IT services, data centres, transport, payroll, business continuity, etc).
capital assets
assets may require substantial up-front costs to purchase.
•Could generate substantial revenues over time.
•Continuous maintenance to keep asset working.
•Benefits received in business for several years.
revenue expenditure
when a business spends money for short-term benefits.
•Funds ongoing operations.
•Recorded as operating expenses.
•Benefits received in less than one year.
•Business income is not impacted immediately.
deferred revenue
money received in advance
•Payment in advance for goods/services.
•Documents goods to be received in the future.
•Documents prepayment as an asset for now.
advantages big company’s gain in production due to their size
Fixed costs – economies of scale
•Must be paid regardless of units produced.
•Expenses shared over larger operations.
•Can utilise equipment more efficiently.
Variable costs – economies of scale
•Labour costs managed more effectively.
•Skills/availability combined to reduce costs.
•Raw material costs reduced through bulk buying.
technological economies of scale
•Mass production techniques to improve productivity.
•Up-to-date equipment with automated production flows.
•Technically skilled staff to maintain production processes.
specialism economies of scale
focus on becoming extremely proficient in specific areas of operations.
•Staff employed for very specific skills.
•Production techniques divided into specialisms.
•Need to pay higher salaries to attract skilled staff.
purchasing economies of scale
balance of power between the organisation buying the goods and services, and the suppliers.
Producers creating large quantities can lower own costs.
•Bulk buying can help negotiation of discounts.
•Greater discounts for guaranteed contracts.
diseconomies of scale
tipping point in aiming for economies where organisations lose efficiencies and unit costs of production start to rise.
•Coordination becomes onerous with expansion.
•Complexity leads to loss of management control.
•Staff less likely to follow organisational policies.
staff pay roll
•list of every employee and how much each is paid for a set period on a given date
•recording every type of employees’ pay they receive
•eg salary,tips,commission ect
•deductions eg tax, pension,student loans
utilities
•basic services any business needs to be able to operate.
•gas and electricity,internet,water ect
insurance-definition-types
•form of protection against financial loss should something untoward or unexpected happen.
••Professional indemnity.
•Public liability.
•Employer’s liability.
who needs insurance-risks
•Sole traders and freelancers.
•Consultants and contractors.
•Negligence claims for errors.
•Intellectual property claims for plagiarism.
•Confidentiality breaches
company vehicles
•Service maintenance and repairs.
•Arrange, deliver and pay for MOT.
•road tax
responsibilities
•duty of care to ensure safety
•Ensure employees understand their role and responsibilities.
•Provide fuel cards to vehicle drivers to keep moving
