Define the term 'working capital'.

Mark scheme

Marking points from the official mark scheme (Feb/Mar 2017). The mark or mark type is shown in brackets.

1. [2] The capital needed to pay for day-to-day running costs, e.g. raw materials and credit offered to customers.
2. [2] In accounting terms working capital = current assets-current liabilities.
3. [1] Partial definition given (limited understanding).
4. [3] Sound explanation of revenue and capital expenditure that clearly explains the difference. Revenue expenditure is spending on all costs and assets other than fixed assets (non-current assets) – includes wages, raw materials, and maintenance of fixed assets. Capital expenditure is spending on assets such as machinery, vehicles and buildings that are expected to last for more than one year. These will be depreciated over time.
5. [2] Sound explanation of only one of the concepts or a partial explanation of the two concepts in an attempt to explain the difference.
6. [1] Partial explanation of either revenue or capital expenditure.