There are many receipts that a business generates on a daily basis. These can be for expenses, payments, and other types of transactions. When these receipts are generated, they are classified into one of two categories: capital and revenue receipts. Let us now look at the meaning of these terms and the functions they perform in an accounting sense. The following points would help you to understand the difference between capital receipt and revenue receipt clearly.
You Can Also Read: Difference Between Capital and Revenue Expenditure
What Is Capital Receipt?
The capital receipt includes money received from the sale of property, equipment, or shares in the company. Capital receipts are also generated from loans and other forms of financing. The proceeds from these transactions are typically used to fund expansion projects, new product development, or other investments that will have a long-term impact on the business. They can be used to finance a company’s growth or expansion.
Examples of capital receipts include the sales of intangible assets like patents or copyrights. Capital gains is a type of revenue receipt where an asset is sold for more than it was bought for, resulting in a positive gain on the transaction. A capital loss is when an asset is sold for less than it was bought for, so there’s a negative net gain on the transaction. Capital receipt can be raised through;
- Investors, loans, or the sale of property or equity.
- Issuance of shares
- Government allowance, and
- Claiming insurance
What Is Revenue Receipt?
Revenue receipt refers to the receipts generated through a company’s core operations. These include the funds that are received in exchange for goods, services, and dividends earned on investments that are considered to be part of the normal operations of the business. Revenue receipts are typically used to cover the day-to-day costs of running the business For businesses, revenue is the top line on the income statement and is often referred to as gross income.
Revenue receipts are an important part of a company’s financial picture and can be used to measure its performance over time. They can also be used to compare a company’s revenue with that of its competitors. When evaluating a company, investors and analysts often look at revenue growth as one of the key indicators of success.
Capital Receipt Vs Revenue Receipt(Comparison Table)
|Basis For Differences||Capital Receipt||Revenue Receipt|
|Definition||It refers to the capital(income) generated by a business entity through investment and other financing activities.||It refers to the income earned from the core business operating activities.|
|Nature||It is non-recurring in nature.||It is recurring in nature.|
|Found||It is found on the liabilities side of the balance sheet.||It is shown on the credit side of the income statements.|
|Received In Exchange Of||Source of income||Income|
|Examples Include||Loans and sales of fixed assets.||Sales of products of the business.|
Key Difference Between Capital And Revenue Receipt
There is a key difference between capital receipts and revenue receipts.
- Capital receipts are the receipts that are generated from investments and other financing activities of a company. On the other hand, revenue receipt refers to the income generated through the operating activities of an organization/company.
- Capital receipts are used to finance investments and expenditures, whereas revenue receipts are used to finance the operating expenses of a business.
- A capital receipt can be in the form of equity financing, loans, or grants. On the other hand, A revenue receipt can be in the form of sales, fees, or interest income.
- While a capital receipt is non-recurring in its nature, a revenue receipt is recurring.
In conclusion, the main difference between capital receipts and revenue receipts is that capital receipts are used to finance investments while revenue receipts are used to finance operations. Capital receipts generally come from sources outside of the business, such as loans or investments, while revenue receipts come from within the business, such as sales or services.