Capital Receipt and Revenue Receipt

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Both capital and revenue receipts are very important parts of accounts. There is a vivid difference between capital receipt and revenue receipt. Capital receipts are those that do not have a recurrent nature and do not have a tendency of occurring again and again. They only occur once in the final accounting year and are specifically mentioned in the liability corner on a balance sheet. Whereas, revenue receipts are a part of the common and normal operations of the businesses and so they occur continuously.   

Capital Receipt

Capital receipt has a nature of occurring again and again in the balance sheet. The capital receipt is a cash-flow receipt and is situated in the liability portion of the balance sheet. It gradually leads to the formation of all the liabilities that can be useful in the future and can be curated well. The decrement of such assets eventually takes place in the future. 

Between capital and revenue receipts, the former is always free from taxation unless there is a provision related to it that leads to tax. The capital receipt is a non-routine receipt that eventually becomes load and causes vivid depletion related to the asset of the organization or business. All types of capital receipts are the cash that is received from the sale of a fixed asset.   

Revenue Receipts Meaning

Revenue receipts are those receipts that are very important for any business or organization and without their presence, a business fails to survive for a longer period. All the incomes that are received from periodic and daily activities include certain operations that include cash in the business:

  • Sale of any inventory

  • Incomes from the services that are rendered.

  • Discounts that are received from several suppliers.

  • Interest received

  • Rent received

Hence, revenue receipts tell us that they have a long-lasting effect on the income of the company. 

Difference between Revenue Receipt and Capital Receipt 

There is a possibility of two types of receipt occurring in a business or an organization. Both revenue and capital receipt differ from each other where the former is responsible for profit and loss in a company and the latter remains against the expenses.

Difference between Capital and Revenue Receipt 

Distinguish between capital receipt and revenue receipt is done based on the following factors:

  • Meaning – 

Capital receipts are those receipts that are produced from the financing activities and the investment of a business. 

Revenue receipts are that income that is generated from operating activities of a business

  • Nature – 

The capital receipts are non-recurring.

The revenue receipts are recurring in nature.

  • Term –

Capital receipts are of long term

Revenue receipts are of short term 

Non-Debt Capital Receipt 

These are the receipts that are received from the government so that a company can sell its old assets. They are not treated as liabilities. 

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FAQ (Frequently Asked Questions)

1. Give Some Capital and Revenue Receipt Examples.

Ans. The receipts that do not have a relation with the day to day activities of the company are called capital receipts. They occur sometimes and leave a long-lasting effect on the company. Some of the examples are:

  • The cash that is generated after selling fixed assets.

  • The loan that a company receives from the bank.

Revenue receipts are the receipts those receipts that occur routinely. Some of the examples are:

  • The revenue that is received after selling goods to a customer.

  • Cash discounts and commission incomes that are received by a company.

2. What are Capital and Revenue Expenditure and Receipts?

Ans. Capital expenditure refers to long-term expenditures. That also means the expenditure that occurs if a particular product is not consumed in a way it should have been. The different types of capital expenditure are as follows:

  • Cash that is used for business purpose 

  • IT items

  • Electric equipment 

  • Purchasing machinery and plants items 

Revenue expenditures are referred to items that do not have much value. There are two categories of revenue expenditures. 

  • Direct Expenses- 

They include the cost of producing raw materials and then turning them into finished products. 

  • Indirect Expenses- 

They are related to the distribution and sale of the goods. 

3. What are the Sources of Revenue of the Government?

Ans. About 50% of the total revenue is received from the income tax, 7% from the corporate income tax and 36% from the payroll tax. The rest comes from mixed sources.

  • Individual Income tax is the largest source that produces revenue in a country. 

  • Corporate Income tax provides 7% of government revenue.

  • Social Insurance taxes are the taxes charged on earnings and wages. 

  • Federal Excise taxes are the taxes charged on the purchase of services and goods that include cigarettes, alcohol, gasoline, and many more.