Difference Between Capital Receipts And Revenue Receipts

For example: revenue expenditures are shown in the profit and loss account as their benefits are for one accounting period i.e. in which they are incurred while capital expenditures are placed on the asset side of the balance sheet as they will generate benefits for more than one accounting period and will be transferred to profit and loss account of the year on the basis of utilisation of that benefit in particular accounting year. Hence, both capital and revenue expenditures are ultimately transferred to profit and loss account.

Capital and Revenue Receipts Examples:

Capital Receipts:

Capitals contributed by members.Share capital contributed by the share holders/ members.Loans raisedProceeds from sale of fixed assets.Life membership fees in the case of clubs and associations.Legacies.Government grants for specific purpose.Donations for specific purpose.

Revenue Receipts:

Receipts from sale of goods or services.Discounts, commissions received.Interest on Bank Deposits.Annual Subscriptions in the case of clubs and associations.Donations which are general in nature.Entrance fee.Sale of old news papers.Locker rent.

Capital Receipts

Capital receipts refer to amounts received by a business which lead to increase in the total capital. They increase liabilities or reduce assets. These are funds generated from non-operating activities of a business hence are not shown inside the income statement.They are shown inside a balance sheet.They are non-recurring in nature which means that they don’t occur regularly.They are not available for distribution of profits.Capital receipts are not obtained by the normal course of business operations.Examples – Issue of shares or debentures, Sale of fixed assets, Loans received, Additional capital introduced by the proprietor(s), etc.

Revenue Receipts

Revenue receipts are amounts received by a business as a result of its core activities. These are funds generated from a firm’s operating activities hence are not shown inside the balance sheet.They are shown on the credit side of Trading and Profit & Loss Account.They are recurring in nature and can be seen quite often.They are available for distribution of profits.Revenue receipts are obtained by the normal course of business operations.Examples – Sales (inventory), Sales (services rendered), Discount received from creditors or suppliers, Sale of scrap, Interest earned, Dividends received, Rent received, etc.