Capital Receipt vs. Revenue Receipt: What's the Difference?
Edited by Harlon Moss || By Janet White || Published on November 9, 2023
Capital Receipt is money obtained from long-term sources, often affecting liabilities or assets, while Revenue Receipt is the routine income from business operations.
Key Differences
Capital Receipt and Revenue Receipt are integral terms in accounting, representing different inflows of money. Capital Receipt is generally money received from non-operating sources. These receipts usually result from long-term financing activities, such as issuing shares or bonds or selling fixed assets. For instance, if a company sells a piece of its property, the money acquired would be classified as a Capital Receipt.
On the other hand, Revenue Receipt refers to money obtained from a company's primary activities. These are recurrent, coming from the core business operations like sales of goods or services. Every time a business sells its product or provides a service and receives payment, it's considered a Revenue Receipt. This sort of receipt doesn't create any future obligation and is directly linked to earning activities.
One key distinction between Capital Receipt and Revenue Receipt lies in their impact on financial statements. Capital Receipts often lead to a change in the business's overall capital structure, affecting the balance sheet. Conversely, Revenue Receipts influence the profit and loss account, showcasing a company's operational performance.
In essence, while both terms deal with incoming funds, their sources and implications differ. Capital Receipt is more about long-term financing or asset disposal, while Revenue Receipt pertains to the everyday earnings of a company from its central activities.
Comparison Chart
Source
Non-operating activities, such as sale of assets or equity issuance.
Core business operations, e.g., sale of goods or services.
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Effect on Financial Statements
Primarily affects the balance sheet.
Mainly influences the profit and loss account.
Duration
Generally one-time or non-recurring.
Regular and recurring.
Future Obligation
Might create future obligations (e.g., repayments for loans).
Doesn’t create future obligations.
Nature
Capital in nature; relates to business financing.
Revenue in nature; relates to business operations.
Capital Receipt and Revenue Receipt Definitions
Capital Receipt
Amounts received in the form of loans or borrowings.
The business secured a long-term loan, leading to a Capital Receipt of $3 million.
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Revenue Receipt
Amounts obtained without creating future liabilities.
The company's software license sales contributed to a Revenue Receipt.
Capital Receipt
Funds raised from long-term financing activities.
The company issued bonds and generated a Capital Receipt of $2 million.
Revenue Receipt
Proceeds from day-to-day trading activities.
The daily sale of bakery items resulted in a Revenue Receipt.
Capital Receipt
Any receipt that doesn’t arise from business operations.
The proceeds from the sale of an investment amounted to a Capital Receipt.
Revenue Receipt
Income from primary business activities.
The sale of electronic products led to a Revenue Receipt of $1 million.
Capital Receipt
Proceeds from the issuance of company shares.
The initial public offering led to a Capital Receipt of $10 million.
Revenue Receipt
Regular and recurring earnings from operations.
Monthly service fees generated a consistent Revenue Receipt.
Capital Receipt
Money from the disposal of a fixed asset.
Selling a factory building resulted in a Capital Receipt of $5 million.
Revenue Receipt
Receipts that don’t lead to a reduction in assets or increase in liabilities.
Subscription fees collected led to a Revenue Receipt.
FAQs
What’s a Capital Receipt?
It's money obtained from non-operating sources, often affecting assets or liabilities.
Define Revenue Receipt.
It's regular income generated from a company's main business activities.
Are share issuance proceeds a Capital Receipt?
Yes, as it pertains to long-term financing.
Is rental income a Revenue Receipt?
Yes, since it's a recurring income from core business operations.
Do daily sales result in Revenue Receipts?
Absolutely, they reflect core business earnings.
Is interest income a Revenue Receipt?
Yes, it’s a regular income from investments.
Can a loan received be termed a Capital Receipt?
Yes, since it creates a future repayment obligation.
Are dividends received a Revenue Receipt?
Yes, they represent income from investments.
How do subscription fees classify, Capital or Revenue Receipt?
They are Revenue Receipts, being operational income.
Does selling machinery result in a Capital Receipt?
Yes, it’s considered a Capital Receipt as it comes from asset disposal.
Are sales returns considered Revenue Receipts?
No, they reduce the total Revenue Receipts.
Is freight income a Revenue Receipt?
Yes, if it's from primary business operations.
Does a Capital Receipt recur annually?
Typically, no. They are often one-time or non-recurring.
Do Revenue Receipts affect the profit and loss account?
Yes, they directly influence the company’s operational performance.
Can issuing debentures lead to Capital Receipt?
Yes, it's a form of long-term financing.
Is commission income a Revenue Receipt?
Yes, it’s earned from primary business activities.
If a company sells its brand, is it a Capital Receipt?
Yes, it involves the disposal of an intangible asset.
What financial statement does a Capital Receipt influence?
Primarily the balance sheet.
Can the sale of a patent be a Capital Receipt?
Yes, as it involves asset disposal.
Does repaying a loan reduce Capital Receipts?
No, repayment affects liabilities but isn't a receipt.
About Author
Written by
Janet WhiteJanet White has been an esteemed writer and blogger for Difference Wiki. Holding a Master's degree in Science and Medical Journalism from the prestigious Boston University, she has consistently demonstrated her expertise and passion for her field. When she's not immersed in her work, Janet relishes her time exercising, delving into a good book, and cherishing moments with friends and family.
Edited by
Harlon MossHarlon is a seasoned quality moderator and accomplished content writer for Difference Wiki. An alumnus of the prestigious University of California, he earned his degree in Computer Science. Leveraging his academic background, Harlon brings a meticulous and informed perspective to his work, ensuring content accuracy and excellence.
