Capital and revenue receipts

Receipts are the amounts actually received. The receipts of business are of two kinds:-

  1. Capital receipts
  2. Revenue receipts

Capital receipts

Explanation:

Capital receipts include the following:

  • Receipts from the sale of fixed assets of a business.
  • Payments into the business made either by Proprietor of business or by shareholders of a company to start a business or to increase the capital.
  • Receipts of loan from partners, bankers and private individuals.
  • Amount received on account of some capital profit.

Examples:

  • Sale of old machinery for $5,000.
  • Sale of 1,000 shares of common stock
  • Receipt of loan from a bank.

Revenue receipts

Explanation:

Revenue receipts include the following:-

  • Receipts of cash from the sale of merchandise.
  • Amount received on account of some revenue profit.

Examples:

  • Sale of goods to customers for $1,000
  • receipt of fee amount to $2,000 earned from provision of service to a client.

Revenue receipts are shown as an income in the income statement in the year in which they occur and capital receipts are shown as liabilities in the balance sheet.

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