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What Are Revenue Receipts

And Capital Receipts?
Updated on: 27 Dec, 2022 04:03 PM

 Receipts are the earning of the company and through it revenue is generated. Not all the

receipts contribute towards the profit and loss in business. Receipts can be categorized as
 Revenue receipts and

Capital receipts.

To some extent, we can say that revenue receipts affect the profit and loss of the business and
capital receipts don’t.
 For a better understanding of the revenue receipts and capital receipts let’s discuss these terms
 in detail.


Contents

What do you understand by Revenue Receipts?

Examples of Revenue Receipts

Some Important features of Revenue Receipts

What do you understand by Capital Receipts?

Types of Capital Receipts

Examples of Capital Receipts

Features of Capital Receipts

Difference between the Revenue Receipts & Capital Receipts

What do you understand by Revenue and Capital expenditure?


Examples of revenue expenditures are

 Capital Expenditure

Examples of capital expenditures are


 What do you understand by Revenue

Receipts?

 Revenue receipts are money earned by a business through its day to day operational activities.
These are recurring in nature and directly affects the profit and loss of the business. Thus, the
disclosure of revenue receipts are required to be made in the income statement of the company
or organization.
In general terms, we can say that revenue receipts do not create any liability for the business
nor does it reduces the assets. It simply suggests that goods or services have been delivered to
the clients and in return, income has been received. Ultimately it is a source of cash inflow which
leads to an increase in the total revenue of a company.

Examples of Revenue Receipts



 Some examples of receipts which are of routine nature i.e. revenue receipts in an organization
are,

Money received for services provided to customers

Rent received

Discount received from suppliers, vendors or creditors

Dividend received

Interest earned

Commission received

Bad-debts recovered(if any)

Revenue earned by the sale of scrap material or waste etc

Some Important features of Revenue

Receipts
Benefits from revenue receipts can be taken for a short period of time i.e one accounting
or financial year

As benefits from revenue receipts are for a short period of time, thus another feature
 comes that it is recurring in nature

 Revenue receipts come directly from the operational activities of a business

It directly affects the profit and loss of business. As when revenue is received by a
company it will either increase the profit or will contribute towards loss.

Disclosure is made under Trading and Profit or Loss account and not in the Balance
Sheet.




What do you understand by Capital
 Receipts?
Capital receipts are cash inflow in business arising from financial (capital) activities and not the
operating activities of the business. These are receipts resulting from activities which are
occasional or not of routine nature. Capital Receipts are not the regular or main source of
income for an organisation. Thus it either creates a liability or reduces the assets for the
business entity. And, because of its capital nature such receipts are shown in the balance sheet
of a company and not the income statement or Profit and Loss account.
These receipts are recorded on an accrual basis (means recording an income for which you
have got the rights to receive but the actual receipt has not yet occurred). Also, since capital
receipts are non-recurring in nature, they can not be used for the distribution of profit, unlike
revenue receipts.



 Types of Capital Receipts
Capital receipts are divided into three groups-

 1. Borrowings

 2. Recovery of Loans and

 3. Other Capital Receipts

1. Borrowings

It includes the funds raised from outside to meet the expenditure incurred in the
company. It is considered as the capital receipts because it creates liability for the
company.

2. Recovery of Loans

Sometimes the company separates a part of the asset to recover the loans in future,
as a result, it decreases the assets of the company.

3. Other Capital receipts

Under this category of Capital Receipts, Disinvestment and Small Savings are
covered.



 Examples of Capital Receipts
Cash received from the sale of fixed assets

Amount received from Shareholders and debenture holders

 Borrowings which includes loans, disinvestment, insurance claims etc.



 Features of Capital Receipts
 Capital receipts are non-recurring in nature

Funds generated from capital receipts are from non-operating activities.

It either creates a liability or reduces the asset.

It has no impact on the income statement instead balance sheet is affected by the capital
receipts.

Difference between the Revenue Receipts

& Capital Receipts

S.No. Revenue Receipts Capital Receipts 
 1. Revenue receipts are generated from Capita receipts are generated from
the operational activities of the business. the financial activities.

2. It affects the profit and loss of the It has no impact on the profit and
business. loss of a business.


3. Revenue receipts are recurring in Capital receipts are non-recurring
 nature. in nature.

4. It is the amount received from the sale of Capital receipts result from any

normal day to day products or services loan, disinvestment, insurance
 of the company claim etc.

5. Affect the Income Statement of the Capital receipts affect the Balance
company. sheet.

6. Through revenue receipts distribution of Profit distribution is not available

profit is done. through capital receipts.

7. It includes Sale of products of business It includes the sale of fixed or

financial assets.

8. Revenue receipts are one of the sources Capital receipts can not be used
for creating reserves for creating reserve funds in the
business.


 What do you understand by Revenue and
Capital expenditure?

 Revenue Expenditure
 Revenue expenditure is short term in nature and it includes normal day to day expenditure that
 takes place during the operational activities of a business and expenses that are incurred during
the repair and maintenance cost of a revenue-generating assets. These are recurring in nature

as it covers all the expenses related to repainting, renewal and regular maintenance of the fixed
assets which is being used for generating revenues.

Examples of revenue expenditures are

Amount spent on

Sale of a product

General and administrative expenses


Repairs and maintenance etc 
 Capital Expenditure
On the other hand, Capital expenditure is incurred to avail the long term(more than 1 year) assets
in the business. In general, we can say capital expenditures are for fixed assets that impact the
 productivity in the long run. As it is for the long run, so it is charged gradually through the
depreciation method.




Examples of capital expenditures are
Amount spent to acquire

Land

Building

Plant

Equipment

Furnishing

Fixtures etc


 The main purpose of incurring the capital expenditure is to increase the income generating
ability of a company.

Therefore, we can say that main purpose of incurring capital expenditure is to increase the
ability of a company and generate earnings whereas revenue expenditure covers operational
and maintenance cost of running the business, which is needed to retain the asset in working
 manner.
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 CA Abhishek Soni

 Abhishek Soni is a Chartered Accountant by profession & entrepreneur by passion. He is the co-founder &
 CEO of Tax2Win.in. Tax2win is amongst the top 25 emerging startups of Asia and authorized ERI by the
 Income Tax Department. In the past, he worked in EY and comes with wide industry experience from telecom,
 retail to manufacturing to entertainment where he has handled various national and international

assignments.


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