Difference between Capital Receipts and Revenue Receipts: Receipts that are not of a revenue nature are capital receipts.The Receipts which are not received now and then can be treated as capital receipts. The distinction of transactions into revenue and capital is done to place them in the Profit and Loss account or on the Balance Sheet.
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 based on utilization of that benefit in the particular accounting year. Hence, both capital and revenue expenditures are ultimately transferred to the profit and loss account. Must Read Accounting Standard 10.
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Capital and Revenue Receipts Examples:
Capital Receipts:
- Capitals contributed by members.
- Share capital contributed by the shareholders/ members.
- Loans raised
- Proceeds from the sale of fixed assets.
- Life membership fees in the case of clubs and associations.
- Legacies.
- Government grants for specific purposes.
- Donations for specific purposes.
Revenue Receipts:
- Receipts from the sale of goods or services.
- Discounts, and commissions received.
- Interest on Bank Deposits.
- Annual Subscriptions in the case of clubs and associations.
- General donations.
- Entrance fee.
- Sale of old newspapers.
- Locker rent.
Capital Receipts
- Capital receipts refer to amounts received by a business which lead to an increase in the total capital. They increase liabilities or reduce assets. These are funds generated from non-operating activities of a business and hence are not shown inside the income statement.
- They are shown inside a balance sheet.
- They are non-recurring which means that they don’t occur regularly.
- They are not available for the 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. Must Check Marginal Costing Introduction.
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 and hence are not shown inside the balance sheet.
- They are shown on the credit side of the Trading and Profit and Loss Account.
- They are recurring in nature and can be seen quite often.
- They are available for the 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.
Difference between Capital Receipts and Revenue Receipts:
| S.No | Capital Receipts | Revenue Receipts |
| 1 | The amount realized by the sale of fixed assets or by the issue of shares or debentures is a capital receipt. | The amount realized by the sale of goods or rendering services is always a revenue receipt. |
| 2 | A receipt in substitution of a source of income is a capital receipt. | A receipt in substitution of an income is a revenue receipt. |
| 3 | The amount received for surrender of certain rights under an agreement is a capital receipt because a capital asset is being given up in the form of these rights. | The amount received as compensation under an agreement for the loss of future profits is a revenue receipt. |
| 4 | Instead of lump sum payment if the payment is received in installments, it is a capital receipt. | If an income is received in a lump sum it is a revenue receipt. |
| 5 | The amount realized from the sale of a capital asset or investment is capital receipt. | The amount realized from the sale of an asset kept for sale is a revenue receipt. |
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