Business Accountant Tutorial | Capital Receipts and revenue Receipts

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Capital Receipts and revenue Receipts

A receipt is a written acknowledgment that a specified article or sum of money has been received as an exchange for goods or services. The receipts act as the title to the property obtained in the exchange.

Types of Receipts

– Capital Receipt: Capital receipts are the funds received into the businesses that are not part of the operating activities of the establishment. Capital receipts primarily include external assistance, market loans, small savings, and Government provident funds.

– Revenue Receipt: Revenue receipts comprise interest and dividends on the investment made by the government. Revenue receipts and capital receipts together imply the government’s total cash inflow.

Differences between Capital and Revenue Receipt

Basis of Distinction	Capital Receipts	Revenue Receipts
Source	Capital receipt is the amount received from the sale of assets, shares and debentures	Revenue receipt is the amount received from the sale of goods and services.
Availability	Capital Receipts are not available for the profit distribution	Revenue Receipts are available for the profit distribution after deducting revenue expenses
Nature	Capital receipt is of non-recurring nature	Revenue receipt is of recurring nature
Utilization	Capital Receipts cannot be utilized for creating a reserve fund	Revenue Receipts can be utilized for creating a reserve fund after deducting revenue expenses
Impact	Capital Receipt affects financial position of the business.	Revenue receipt affect operating results of the business.
Survival	A Business unit can survive without any Capital Receipts during an accounting period	A Business unit cannot survive without any Revenue Receipts during an accounting period
Treatment	Capital receipt is shown on the liabilities side of the balance sheet.	Revenue receipt is shown on the credit side of the trading and profit and loss accounts.
Reserves	Capital Receipts are the sources for creating the capital reserves	Revenue Receipts are the sources for creating the revenue reserves

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