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Capital Receipts and Revenue Receipts

Receipts are the opposite of expenditure. Just like expenditure, a clear distinction between capital receipts and revenue receipts is also necessary.

Capital Receipts - Capital receipts are the amounts received in the form of additional capital introduced in the business, loans received and sale proceeds of the fixed assets. You may observe that when a loan is received, it increases the business liability. Hence, it cannot be treated as revenue. Sale of any fixed asset reduces fixed assets hence, the amount received is not revenue earned in the normal course of business. In fact, capital receipts do not affect the profit or loss of the business. They either increase the liabilities or reduce the assets. Hence, these are shown in the Balance Sheet only.

Revenue Receipts: These are the amounts received in the normal and regular course of businesses mainly through sale of goods and services. An important feature of revenue receipts is that the amount received does not need to be returned to any one. All such receipts are revenue receipts and are treated as incomes. Hence, these are shown on the credit side of the Profit and Loss Account.

Distinction between Capital Receipts and Revenue Receipts


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Capital Receipt

Revenue Receipt


It is the amount realized by sale of fixed assets or by issue of shares or debentures or by secured or unsecured loans taken

It is the amount realized by sale of goods or rendering of services


It is an item of Balance Sheet

It is an item of Trading and Profit and Loss account


Capital receipts are normally of non - recurring nature

Revenue receipts are normally of recurring nature


Capital assets are the receipts which are not obtained in course of normal business activities

Revenue receipts are obtained in the course of normal trading operations


Capital receipts are normally not available for payment as profit to the owner of the business

Revenue receipts net of revenue expenses and expired portion of capital expenditure/deferred revenue expenditure are available for distribution to the owner of the business

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