Information on money in a business.

Income

Income is basically the money received by a company from the result of activities carried out by a business. Other words to describe income are revenue, proceeds, profits, takings, returns, cash flow etc. The money made by a business is their income. This money must be made by the company through activities as such.

Expenditure

Expenditure is money that is spent by a business for goods / services. There are different types of expenditure. The two types are Capital Expenditure (CAPEX) and Operational Expenditure (OPEX). CAPEX is an investment in the business. It is the cash flow made by investments within the company. OPEX is the money spent to keep the business running and in good order. It can be described as a measurement of efficiency of a business.

Profit / Loss

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A profit / loss is the money spent by a business taken from the entire money made from the company. A profit occurs when the money spent is less than the money received. However a loss occurs when the money spent is more than the money received in a business. Profits are vital because people running a business are in that position to make money or in other words, a profit.

Cost Control

 

Cost control is important in a business because it determines what money is being spent and what money is being received. This can decide whether the company makes a profit or loss. There are different types of cost which are direct costs, indirect costs, variable costs, fixed costs, contributions and marginal costing.

Variable costs are expenditure that changes in proportion to the activity of a business. This means that the sum of all marginal costs make up the variable cost. They are sometimes referred to as unit-level costs because they can vary due to the amount of units produced. However, direct costs are different slightly because they can be associated with a particular ‘cost object’.

Indirect costs are expenses that do not directly affect a company. They are the same as fixed costs which are expenditures such as taxes, administration etc. They are costs that do not change and have to be paid to keep the business running.

Contributions are funds raised by the company, whether it is through charity events, donations or governmental agencies. Non-profit or charitable organizations rely on contributions because they receive no government funding and all their proceeds are given to struggling or people needing aid.

Marginal costs are paid out by a business for the additional money spent on a unit. For example, money spent on materials that were scrapped due to a mistake in production would be classed as marginal costs.

Assets

 

Assets are valuable possessions of a company. Assets can be buildings, cash, stock, rights etc. Assets are a main part of a business as they make up most of the company.

Investment of fixed assets or fixed investment is the investment in fixed capital.