The points of difference between Capital receipts and Revenue receipts are given below.
Capital receipts are those receipts that are received from the disposal or sale of an asset or received in form of additional capital introduced. It also includes the receipts in form of loans taken by a business organization. These are non-recurring in nature i.e. these are not frequently received. Capital receipts are shown on the Liabilities side of the Balance Sheet. When the assets of a firm are sold it decreases the fixed assets and when the loan is taken or additional capital is introduced it increases the liability. In both cases, the amount so received is regarded as capital receipts. From this discussion, it can be stated that capital receipts reduce the fixed assets and increase the liabilities of the business organization. Some of the examples of such receipts are the sale of a plant, a loan from a bank, etc.
Revenue receipts are those receipts that are received in the conduct of ordinary and day-to-day business activities. The sale of goods and services is the main source of revenue receipts. These receipts or incomes are received frequently in the normal course of business operations. Revenue receipts are shown on the credit side of the Trading and Profit and Loss Account.
Difference between Capital Receipts and Revenue Receipts
| Basis of Difference | Capital Receipts | Revenue Receipts |
|---|---|---|
| Meaning | It is the amount received from the sale of fixed assets, a loan taken or additional capital introduced. | It is the amount received from the sale of goods and services. |
| Activities | These are not received from ordinary business activities. | These are received from ordinary business activities. |
| Nature | It is non-recurring in nature. | It is recurring in nature. |
| Shown | It is shown on the Liabilities side of the Balance Sheet. | It is shown on the Credit Side of the Trading and Profit and Loss Account. |
| Examples | Sale of Furniture, Loan from Bank, etc. | Sale of Goods, Rent Received, Profit on Sale of Machinery, etc. |
Also, Read
What is Capital Expenditure?
The capital expenditure results in an income or benefits for a longer period that extends for a period of more than a year. This expenditure is shown in the Balance Sheet
What is a Promissory Note?
A promissory note is an unconditional promise in writing given by the buyer (or creditor) to the seller (or debtor) to pay the amount of money specified therein to the seller or to the order of seller or to bearer.
What are Capital Reserves?
The reserves that are created out of the capital profits of a business are known as Capital reserves. Capital profits are the profits that are not earned in normal business activities.
What are Secret Reserves?
Secret reserves are those reserves that exist in the business to strengthen its financial position but are not disclosed in the Balance Sheet.