The Non-recurring receipt of the business is called capital receipt. Thus, capital receipts do not have any effect on profit or loss of the business. Now learn About Capital Receipt and Revenue Receipt Explanation Examples Differences.
Capital Receipts includes:
- Amount received against sale of an asset.
- amount contributed as capital.(Capital Receipt and Revenue Receipt Explanation Examples Differences)
- the amount received by way of loan.
- cell process of long-term Investments.
- Legacy received in the non-profit organization.
- additional capital introduced by the proprietor or partners.
- amount received by issuing shares of debenture in case of the company.
- Recovery of loan granted by the firm.
- Government grant for the specific purpose.
- Amount received on a sale of the business.
Also, Check out
- Revenue Income and Capital Income.
- Capital Losses And Revenue Losses.
- Capital Expenditures and Revenue Expenditures.
Question: Capital receipts are not directly credited to profit and loss account. for example, when a fixed asset is sold for $22,000 and its cost is $20,000. the capital receipts $22,000 is not credited to profit and loss account. Profit/loss on sale of the fixed asset is calculated and credited to profit and loss account as follows:
Question: owners contribution towards capital of $50,000
Answer: because it creates an obligation on business to repay the amount as owner. according to separate entity concept Businessman and business are different. therefore Honours contribution towards capital is capital receipts.
Question: Entrance fee of $10,000 received by us Social Club.
Answer: because it is non-recurring receipt for non-profit organization and is added to the capital fund. If the amount is insufficient, it can be treated as revenue income.
The Recurring or Trading Activities Receipts of the business is called revenue. Receipts Normally Revenue Receipts increase the profit or decrease the loss of the business.
Revenue Receipts includes:
- The process of Cash sales.
- Received from customers against goods supplied.
- Fees received against services rendered in the ordinary course of business.
- Commission received.
- interest received.
- dividend received.
- Sale processed of short-term Investments.
Thus, the Example of revenue receipts:
Question: subsidy received from the government $10000
Answer: it reduces the cost of production of the goods, hence it is revenue received only.
Difference between Capital Receipts and Revenue Receipts
- Normally capital receipts are shown in balance sheet whereas revenue receipts are shown in trading and profit and loss account.
- capital receipts received other than business operations whereas revenue receipts are received from business operations.
- Thus, the capital receipts are received in the form of capital, loan or sale processed of assets whereas Revenue Receipts are received in the form of income.
- Thus, Capital receipts belonging to non-recurring nature where is revenue receipts are of recurring nature.
You are here Capital Receipt and Revenue Receipt Explanation Examples Differences.