Difference between capital and revenue receipt

Before understanding the Difference between Capital and Revenue Receipt, the concept of capital receipt and revenue receipt must be known:

CAPITAL RECEIPT

Capital receipt is the amount received by the enterprise which is not revenue in nature and leads to an overall increase in the total capital of the company. Capital receipts generate out of the non-operating activities. It means these receipts do not arise out of the normal course of business.

REVENUE RECIEPT

Revenue receipt is the amount received by the business as a result of its core business activity. It leads to increase in the overall revenue of the business. These receipts refers to the sale proceeds of merchandise or fees received for services rendered, discount received, commission received, interest received, discount received on shares.

Receipt of money in the revenue nature increases the profits or decreases the losses of a business and must be set off against the revenue expenses in order to find out the profit or loss for the period.

DIFFERENCE BETWEEN CAPITAL AND REVENUE RECEIPT

BASIS OF DIFFERENCE	CAPITAL RECEIPT	REVENUE RECEIPT
MEANING	Capital receipt is the income generated from investment and financing activities of the business.	Revenue receipts are the income generated from the operating activities of the business.
NATURE	Capital receipts are non-recurring in nature.	Revenue receipts are reccuring in nature.
AMOUNT	Large amount of funds are involved.	Revenue receipt is generally of small amount in comparison to capital receipt.
SHOWN IN	The capital receipt is shown in the Balance Sheet or Position Statement.	The revenue receipt is recorded at the credit side of Trading or Profit and Loss Account.
RECEIVED IN EXCHANGE OF	The capital receipt is received in exchange of source of income. Example: Sale of plant and machinery results in capital receipt.	This is an income.
VALUE OF ASSET OR LIABILITY	Capital Receipt results out the increase in liability or decrease in the asset.	It does not arises out the increase or decrease in asset or liability.
USE FOR DISTRIBUTION AS PROFITS	These are the receipts which are non-recurring in the nature. That is why the amount received against these receipts are not available for distribution as profits.	These are the receipts which are recurring in the nature. That is why the amount received against these receipts is available for distribution as profits.
CREATION OF RESERVE FUND	These receipts are not used to create reserve funds.	These receipts are used to create reserve funds.
MATCHING	The capital receipts are not matched against the capital expenditure.	The revenue receipts are matched against the revenue expenditure to find out the profit or loss of the firm.

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