Capital & Revenue Receipts – Differences

Just like expenditure, receipts (money coming IN) are also classified into two types.

Capital Receipts

Definition: Money received that is NOT from normal business operations and creates a liability or reduces an asset.

Nature: Non-recurring, not regular income

Shown in: Balance Sheet (as Liability or reduces Asset)

Examples:

• Capital introduced by owner
• Loans taken from bank
• Sale of fixed assets (machinery, building)
• Insurance claim for loss of asset

Example: Took loan of ₹10,00,000 from bank

• This is Capital Receipt
• Shows in Balance Sheet as "Bank Loan ₹10,00,000" (Liability)
• NOT shown in P&L Account as income

Revenue Receipts

Definition: Money received from normal business operations.

Nature: Recurring, regular income

Shown in: Profit & Loss Account (as Income)

Examples:

• Sales of goods
• Commission received
• Rent received
• Interest received
• Discount received

Example: Sold goods for ₹5,00,000

• This is Revenue Receipt
• Shows in P&L Account as "Sales ₹5,00,000"
• Increases profit

Key Differences

Tricky Examples

Sale of Asset

Sold old machinery (Book value ₹50,000) for ₹60,000

Analysis:

• ₹50,000 → Capital Receipt (asset sold)
• ₹10,000 → Revenue Receipt (Profit on sale - shown in P&L)

Insurance Claim

For loss of stock: Revenue Receipt (compensates revenue loss)
For loss of building: Capital Receipt (compensates asset loss)

Quiz

💡 Final Wisdom: "Capital Receipt = Getting a loan or selling your car. Revenue Receipt = Your monthly salary. One creates obligation, other is earned income!"