What are the capital receipts?

Finance ManagementBanking & FinanceGrowth & Empowerment

Capital receipts are a receipt, which creates a liability or decreases the assets of an organization or any business. They increase the total capital of the company.

These can be debt receipts and non-debt receipts. These are shown in the balance sheet rather than the income statement. This is done because; the money/funds are generated from non-operating business activities. Capital receipts are non-recurring in nature.

Debt capital receipts are the receipts, which does not incur any future repayment for the government. Some of the examples are disinvestments, loan and advances recovery etc.

Non-debt capital receipts are the receipts, which are repaid by the government. Some of the examples are short term borrowings, external debts, market loans etc.

The sources of capital receipts are as follows −

  • Borrowings.
  • Loan recovery.
  • Disinvestments.
  • Savings (small).

Example

  • Amount received after selling fixed asset
  • Capital invested by new business partner
  • Loan received from bank
  • Considerations received etc.

How to capital receipts records in balance sheet (some examples)

Selling a fixed asset (recorded in balance sheet)

DebitCredit
Cash (asset) accountFixed asset account

Selling business shares (recorded in balance sheet)

DebitCredit
Cash (asset) accountEquity account

Issues debt (recorded in balance sheet)

DebitCredit
Cash (asset) accountLoan(liability) account
raja
Updated on 18-May-2022 08:47:30

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