GITARATTAN INTERNATIONAL BUSINESS SCHOOL

DELHI-110085

Batch (2016-2021)

ASSIGNMENT OF TAX LAW

Submitted by: DHRUV SHARMA

Roll No: 01319103516
Submitted to: LOVINA ROPIA
 CAPITAL RECEIPT V/S REVENUE RECEIPT

WHAT ARE RECEIPTS?

Receipts are just the opposites of expenses. But without receipts, there may be no existence of

the business. Not all receipts directly increase the profits or decrease the loss. But some affect

the profit or loss directly.

In this article, we will be talking about capital receipts and revenue receipts. In simple terms,

capital receipts don’t affect the profit or loss of the business, as for example, we can say that

sale of long-term assets is one sort of capital receipts.

But revenue receipts affect the profit or loss of a company. As an example, we can say that sale

of products, the commission received etc. are revenue receipts.

A receipt is a written acknowledgment that something of value has been transferred from one

party to another. In addition to the receipts consumers typically receive from vendors and

service providers, receipts are also issued in business-to-business dealings as well as stock

market transactions. For example, the holder of a futures contract is generally given a delivery

instrument which acts as a receipt in that it can be exchanged for the underlying asset when the

futures contract expires. 1

CAPITAL RECEIPT

Capital receipts are the income received by the company which is non-recurring in nature. They

are part of the financing and investing activities rather than operating activities. The capital

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https://www.wallstreetmojo.com/capital-receipts-vs-revenue-receipts/
receipts either reduces an asset or increases a liability. The receipts can be generated from the

following sources:

 Issue of Shares

 The issue of debt instruments such as debentures.

 Loan taken from a bank or financial institution.

 Government grants.

 Insurance Claim.

 Additional capital introduced by the proprietor.

REVENUE RECEIPT

Revenue Receipts are the receipts which arise through the core business activities. These

receipts are a part of normal business operations that is why they occur again and again however

its benefit can be enjoyed only in the current accounting year as its effect is short term. The

income received from the day to day activities of business includes all the operations that bring

cash into the business like: 2

 Revenue generated from the sale of inventory

 Services Rendered

 Discount Received from the creditors or suppliers

 Sale of waste material/scrap.

 Interest Received

 Receipt in the form of dividend

 Rent Received

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 DIFFERNCE BETWEEN CAPITAL REVENUE & REVENUE RECEIPT

1. Receipts generated from investing and financing activities are capital receipts, on the other

hand, receipts from operating activities are revenue receipt.

2. Capital Receipts do not frequently occur, as it is non-recurring and irregular. But, revenue

receipts do not occur again and again they are recurring and regular.

3. The benefit of capital receipt can be enjoyed in more than one year, but the benefit of

revenue receipt can be enjoyed only in the current year.

4. Capital Receipts appears on the liabilities side of the Balance Sheet whereas Revenue

Receipts appears on the credit side of the Profit and Loss Account as income for the

financial year.

5. The capital receipt is received in exchange for the source of income. Unlike revenue

received which is a substitution of income.

6. Capital receipt either decreases the value of an asset or increases the value of liability, but

revenue receipt neither increases nor decreases the value of asset or liability.

SIMILARITIES

1. Both receipts are a part of business activities.

2. Both are necessary for the survival and growth of the company.

3. The source of business income. 3

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http://incometaxmanagement.com/Pages/Taxation-System/Capital-&-Revenue.html