Difference between Capital Receipt and Revenue Receipt
Introduction
Receipts are the money, which come to the business from different sources. A receipt can be classified into two main categories, i.e., capital receipt and revenue receipt. In this article, we will discuss the difference between the two.
What is Capital Receipt?
Capital receipts are the receipts a company receives for its capital investments. In other words, these receipts are either from the sale of assets or money received for increasing capital. Capital receipts are not a regular phenomenon and are not a part of the company’s operations. Examples of capital receipts include the sale of shares or debentures, sale of fixed assets like plant and machinery, and capital contributions by owners.
What is Revenue Receipt?
Revenue receipts are the receipts that a company receives during its normal course of business. In other words, these receipts are earned by the business, and the money generated is directly related to the operations of the company. Revenue receipts are part of the company’s daily business. Examples of revenue receipts include sales revenue, rental income, interest income, and income from services provided.
Difference between Capital Receipt and Revenue Receipt
The primary difference between capital receipts and revenue receipts is that the former is not a part of the company’s regular operations. Capital receipts are generated when a company sells its capital assets or increases its capital by issuing shares. On the other hand, revenue receipts are generated from a company’s regular business operations.
Another significant difference between the two is the accounting treatment. Capital receipts are shown on the balance sheet as a liability or equity, whereas revenue receipts are shown on the income statement. Capital receipts’ impact is long-lasting as they affect the company’s financial position for an extended period. At the same time, revenue receipts’ influence is generally for a short-term period.
Conclusion
To conclude, capital receipts and revenue receipts are two different types of receipts, and it’s essential to differentiate between the two. Capital receipts are a result of a company’s capital investments, while revenue receipts are earned as part of the company’s daily business operations. Understanding the difference between the two allows businesses and investors to make informed decisions about their investments.
Table difference between capital receipt and revenue receipt
Sorry, as an AI language model, I don’t have any personal experiences or preferences. However, I can provide you with a sample HTML table that highlights the differences between capital receipts and revenue receipts.
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| Receipts | Capital Receipts | Revenue Receipts |
|---|---|---|
| Definition | Receipts that are related to the capital assets of an entity, such as sale of fixed assets, capital investments, and borrowing. | Receipts that are generated from regular operations, such as sales of products or services, rent, fines, and fees. |
| Nature | Non-recurring, one-time transactions. | Recurring and repetitive transactions. |
| Impact on Balance Sheet | Increases assets or reduces liabilities. | Increases revenue or reduces expenses. |
| Source | Primarily from non-operational activities. | Primarily from operational activities. |
| Examples | Proceeds from sale of land, machinery, equipment, and other fixed assets, long-term borrowings, and investments. | Sales revenue, rent, fees, fines, and grants. |
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