Let us understand what are capital receipts and revenue receipts, before learning about their differences.
These are the non-recurring income received by the company and come under investing and financial activities.
They are generated from issue of shares, government’s grants, insurance claims, bank loans or loans from financial institutions, issue of denatures etc. Capital receipts reduce an asset or will increase a liability.
These are recurring income received by the company. This comes under business activities and benefits are enjoyed in the current period only.
These are generated from services rendered, interest and rent received, discount from creditors/suppliers, sale of scrap etc.
The major differences between the capital receipts and revenue receipts are as follows −
|Capital receipts||Revenue receipts|
|NATURE||Non – recurring||Recurring|
|EFFECT||Carried to the balance sheet||Shown on income statement|
|OCCURRENCE||Non-recurring and irregular||Recurring and regular.|
|SHOWN IN||Liabilities side of the balance sheet.||Credit side of trading in profit and loss account.|
|VALUE OF ASSET/LIABILITY||Either increase/decrease.||Neither increase/decrease.|