Define capital receipt and revenue receipt?

It is important to know about the proper difference between capital receipt and revenue receipt.

Here receipt is refers to received any amount by way of sale, loan, debenture or from any other way.

Revenue Receipt:-

Revenue receipt is the receipt which generated from the operating sources. It is the major source of income for business. It is shown on the credit side of Trading and Profit & Loss A/c.

Examples:

• Receipt from interest & dividends on investment.
• Commission Received.
• Receipt from sale of goods.

Capital Receipt:-

Capital receipt is the receipt which generated from the non-operating sources, which are having a long term effect. It is shown in the Balance Sheet either as increase in liabilities or as reduction in value of assets.

Examples:-

• Receipt by way of Loan.
• Income generated from issue of shares and debentures in case of company.
• Receipt by the way of capital contributed by proprietors or partners.

What is the difference between Revenue and Income?

Revenue is the receipt from sales of goods or stock. For example Ram sold goods amounting Rs. 45000. This Rs. 45000 is the revenue of Ram.

If the cost of goods sold is Rs. 20000 then this amount is the expense for Ram.

Income refers as surplus of revenue over expenses.

In the above example;

25000 = 45000 – 20000

So, income of Ram is Rs. 25000