Ilya S P2
Section2 (P2): Explain the difference between capital and revenue items of expenditure and income.
a):
Capital income:
Capital income is income generated by an asset over time, rather than from work done using the asset. If a farmer buys land for a certain amount of money and sells it at a profit after one year, the difference in the prices is capital income.
Capital income, also known as capital gains, can only be realized after an asset is sold. In contrast, if an asset is sold at a lower price than it was bought for, the result is a capital loss.
Sole trader:
A sole treader is an individual who sets up and owns their own particular business. They may choose to utilize other individuals yet they are the main holder. A sole trader has boundless obligation.
Partners:
A partner is a person who takes part in an activity or business with others or one of two people who are in a relationship.
Shares:
A unit of ownership that represents an equal proportion of a company's capital. It entitles its holder to an equal claim on the company's profits and an equal obligation for the company's debts and losses.
Two major types of shares are ordinary shares, which entitle the shareholder to share in the earnings of the company as and when they occur, and to vote at the company's annual general meetings and other official meetings, and preference shares which entitle the shareholder to a fixed periodic income but generally do not give him or her voting rights.
Loan:
An arrangement in which a lender gives money or property to a borrower, and the borrower agrees to return the property or repay the money, usually along with interest, at some future point in time. Usually, there is a predetermined time for repaying a loan, and generally the lender has to bear the risk that the borrower may not repay a loan.
Mortgage:
A loan to finance the purchase of real estate, usually with specified payment periods and interest rates. The borrower gives the lender a lien on the
a):
Capital income:
Capital income is income generated by an asset over time, rather than from work done using the asset. If a farmer buys land for a certain amount of money and sells it at a profit after one year, the difference in the prices is capital income.
Capital income, also known as capital gains, can only be realized after an asset is sold. In contrast, if an asset is sold at a lower price than it was bought for, the result is a capital loss.
Sole trader:
A sole treader is an individual who sets up and owns their own particular business. They may choose to utilize other individuals yet they are the main holder. A sole trader has boundless obligation.
Partners:
A partner is a person who takes part in an activity or business with others or one of two people who are in a relationship.
Shares:
A unit of ownership that represents an equal proportion of a company's capital. It entitles its holder to an equal claim on the company's profits and an equal obligation for the company's debts and losses.
Two major types of shares are ordinary shares, which entitle the shareholder to share in the earnings of the company as and when they occur, and to vote at the company's annual general meetings and other official meetings, and preference shares which entitle the shareholder to a fixed periodic income but generally do not give him or her voting rights.
Loan:
An arrangement in which a lender gives money or property to a borrower, and the borrower agrees to return the property or repay the money, usually along with interest, at some future point in time. Usually, there is a predetermined time for repaying a loan, and generally the lender has to bear the risk that the borrower may not repay a loan.
Mortgage:
A loan to finance the purchase of real estate, usually with specified payment periods and interest rates. The borrower gives the lender a lien on the