Capital revenue differs from revenue, in the sense that the former has no effect on the income statement in the year, while the latter offset by the expenses for the period. Read the article that has been provided to you so that you can understand the difference between the capital receipt and the receipt.
|Sense||Capital income is the income generated by investment and business financing activities.||Revenue Revenue is the revenue generated by the company's operations.|
|Term||Long term||Short term|
|Received in exchange for||Source of income||Income|
|Value of assets or liabilities||Decreases the value of the asset or increases the value of the liability.||Increase or decrease the value of assets or liabilities.|
Definition of Capital Receipt
Capital income is the income received by the company which is of a non-recurring nature. They are part of financing and investment activities rather than operating activities. Capital gains reduce a resource or increase accountability. Revenue can be generated from the following sources:
- Issue of shares
- The issue of debt instruments such as bonds.
- Loan taken from a bank or financial institution.
- Government subsidies.
- Insurance claims.
- Additional capital introduced by the owner.
Definition of Received Revenue
Revenue Revenue is the revenue from main business activities. This revenue is part of normal business operations and this is why it occurs again and again, however its advantage can only be enjoyed in the current accounting year as it has a short-term effect. The income received from daily business activities includes all operations that bring money into the business such as:
- Revenue generated from the sale of inventory
- Services rendered
- Discounts received from creditors or suppliers
- Sale of waste / scrap material.
- Interest received
- Received in the form of a dividend
- Rent received
Main differences between capital receipt and revenue receipt
The following points explain in detail the difference between the capital receipt and the receipt:
- Revenue generated from investment and financing activities is capital revenue, while revenue from operating activities is received from revenue.
- Capital Receipts do not occur frequently, as they are non-recurring and irregular. But the revenue no longer occurs and is recurrent and regular.
- The capital receipt benefit can be enjoyed in more than a year, but the revenue receipt benefit can only be enjoyed in the current year.
- Capital Receipts are displayed on the passive side of the Balance Sheet while Revision Revenues appear on the credit side of the Income Statement as income for the year.
- The capital receipt is received in exchange for the source of income. Unlike the receipts that are a replacement for income.
- The capital receipt reduces the value of an asset or increases the value of the liability, but the receipt of entry does not increase or decrease the value of the asset or liability.
- Both entrances are part of the commercial activities.
- Both are necessary for the survival and growth of the company.
- The source of business income.
In general, capital inflows and income receipts play a vital role in business growth, as the company may not be able to survive in the absence of the two.