Capital receipt and Revenue receipt both are used in the business. Capital receipt is the money which is generally generated for the selling of long-term assets, loans from the banks and other sources, money from the property selling. Capital receipts generally increase the liability. Revenue receipt is the money which comes from the running activity of the business-like sale of the goods, rents, commission and interest.
Business is not possible without capital receipt and Revenue receipt. Capital receipt and Revenue receipt are very different from each other. And it’s very important to understand the difference between the capital receipt and Revenue receipt. In this article we will discuss in detail about capital receipt and Revenue receipt. We will also discuss the difference between the capital receipt and Revenue receipt and other aspects which are related to the capital receipt and revenue receipt.
Table of Contents
Capital receipt vs Revenue receipt
| Sr. No. | Capital Receipt | Revenue Receipt |
| 1 | Is the money for the business which is generally generated by selling assets and loans from banks. | Is the money which comes from the day to day operations activities of the business.
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| 2 | Non-recurring in nature. | Regular and recurring in nature.
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| 3 | Benefits is enjoying for more than a year. | Benefits are enjoyed in the current financial year only |
| 4 | either increases liabilities or decreases assets. | Don’t make any effect on the assets. It helps to decrease liabilities in future
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| 5 | Appears at the liability side in the balance sheet. | Shown on the credit side in the balance sheet.
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| 6 | Generated by selling of income source. | substitute of income. |
Capital receipt
Capital receipt is the money which is collected for the business from the long-term assets. Capital receipts are non- recurring in nature; it is a financing part. The main disadvantage of the capital receipt is it either increases liabilities and debts or decreases the assets of the particular firm.
For example, Ravi is a business man and he needs money for his business to grow more in this case he has to generate the capital receipt. Ravi has two choices: either he applies for a loan from the bank and other sources or to sell any of his assets. Assets may be property or companies share. In this case he goes for the loans and liabilities increases. Or he generated money from the assets selling this cause reduction in the assets.
This is the example of the capital receipt. Some other capital receipt resources are.
- Government grants.
- Loans from the banks.
- Insurance claim.
- Issue of shares.
Revenue receipt
Revenue receipt is the money which is earned from the running activities of the firm and company. These running activities are sell of the goods, interest on the investments, rents, dividend, profits and commission. Revenue receipt is the part of the business activities. Good revenue receipt shows the good health of the company. This revenue receipt remains in loop and the earning continues. The benefits of the revenue receipt are accounts in the current financial year only. Some examples which generates money for the company.
- Product selling.
- Commissions.
- Rents.
- Interest in the investments.
- Dividends.
Main differencee between capital receipt and revenue receipt
- Capital receipt is the money for the business which is generally generated by selling assets and by taking loans. While revenue receipt is the money which comes from the day to day operations activities of the business.
- Capital receipt is non-recurring in nature. While revenue receipt is regular and recurring in nature.
- Revenue receipt benefits are enjoyed in the current financial year only. While capital receipt is enjoying for more than a year.
- Capital receipt either increases liabilities or decreases assets. Revenue receipts don’t make any effect on the assets. It helps to decrease liabilities in future
- Capital receipt appears at the liability side in the balance sheet and revenue receipt is shown on the credit side in the balance sheet.
- Capital receipt is generated by selling of income source while revenue receipt is a substitute of income.
Conclusion
Both capital receipt and the revenue receipt is very important for the business. Capital receipt is used to boost the business growth. Capital receipt generates a huge amount of money which works as a booster in the business development. Revenue receipt is back backbone of the business. Revenue receipt of the business should be good. Because it’s the revenue receipt which makes a business able to stand for years. So, these were the importance of the capital receipt and revenue receipt.
This is all about clear cut discussion of the capital receipt and revenue receipt. Hope this article will be helpful for your business if you have any doubts please feel free to comment on us. For more interesting topics like this please go through our website.