Capital receipts are the income received by the company which is non-recurring in nature. They are part of the financing and investing activities rather than operating activities. The capital receipts either reduces an asset or increases a liability. The receipts can be generated from the following sources:
- Issue of Shares
- The issue of debt instruments such as debentures.
- Loan taken from a bank or financial institution.
- Government grants.
- Insurance Claim.
- Additional capital introduced by the proprietor.
Revenue Receipts are the receipts which arise through the core business activities. These receipts are a part of normal business operations that is why they occur again and again however its benefit can be enjoyed only in the current accounting year as its effect is short term. The income received from the day to day activities of business includes all the operations that bring cash into the business like:
- Revenue generated from the sale of inventory
- Services Rendered
- Discount Received from the creditors or suppliers
- Sale of waste material/scrap.
- Interest Received
- Receipt in the form of dividend
- Rent Received
|COMPARISON||CAPITAL RECEIPT||REVENUE RECEIPT|
|Meaning||Capital Receipts are the income generated from investment and financing activities of the business.||Revenue Receipts are the income generated from the operating activities of the business.|
|Term||Long Term||Short Term|
|Shown in||Balance Sheet||Income Statement|
|Received in exchange of||Source of income||Income|
|Value of asset or liability||Decreases the value of asset or increases the value of liability.||Increases or decreases the value of asset or liability.|
In General two types of receipts occur during the course of business. Capital Receipts are described as the money brought to the business from non-operating sources like proceeds from the sale of long-term assets, capital brought by the proprietor, sum received as a loan or from debenture holders etc. In contrast revenue receipts are the result of firm’s routine activities during the financial year, which includes sales, commission, interest on investment.
Capital receipts differ from revenue receipts, in the sense that the former has no bearing on profit or loss for the financial year, whereas the latter is set off against the revenue expenses for the period. Read the article provided to you, so as to understand the difference between capital receipt and revenue receipt.