Difference between Capital and Revenue Receipts

Here we detail about the difference between capital and revenue receipts.

Capital Receipts:

1. Capital receipts are not available for distribution as profits.

2. Capital receipts cannot be utilized for the creation of reserve fund.

3. Loans raised from debenture-holders and financial institutions etc.,

4. Any amount received by the business enterprise which is not in the normal and ordinary course of business such as receipts from sale of fixed assets not kept for resale etc.

Generally, capital receipts are not made available for distribution of profits and cannot be kept for creating any reserve funds.

Revenue Receipts:

1. Revenue receipts, after matching with revenue expenses, are available for distribution as profits.

2. Revenue receipts, after matching with revenue expenses, can be utilized for creation of reserve fund.

3. Money received from the customers for supplying goods.

4. Fees received from the customers for services rendered in the ordinary course of business and earned during the current year only.

Revenue receipts should be matched with revenue expenses of the current period so that actual profit of the business enterprise can be worked out. Hence, we can say that revenue receipts increase the profits of the business enterprise.

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