Capital and revenue receipts and expenditure

Capital and revenue receipts and expenditure
What Are Capital Receipts?

Capital receipts are the receipts which occur from activities which are not part of the normal trading activities of the company. They do not arise from the operating activities of business. Capital receipts are non-recurring in nature and generally appear as liabilities in the balance sheet.

Examples Of Capital Receipts:-

Following are some of the common examples of capital receipts:-

  • Money received from shareholders
  • Money received from debenture holders
  • Loans raised
  • Sale of plant and machinery
  • Sale of investments
  • Insurance claim for machinery damaged

What Are Revenue Receipts?

Revenue receipts are the receipts which occur from activities which are part of the normal trading activities of the company. They arise from the operating activities of business. Revenue receipts are recurring in nature and generally appear as income on the credit side of trading and profit and loss account.

Examples Of Revenue Receipts:-

Following are some of the common examples of revenue receipts:-

  • Sale of goods and services
  • Interest on investments
  • Rent received
  • Commission received
  • Insurance claim for stock damaged

Difference Between Capital Receipts And Revenue Receipts:-

Capital Receipts Revenue Receipts
Capital receipts arise from the non-operating activities of the company. Revenue receipts occur from the operating activities of the company.
Capital receipts are non-recurring and non-continuing in nature. Revenue receipts are recurring and continuing in nature.
Capital receipts usually appear on the liabilities side of balance sheet. Revenue receipts usually appear on the credit side of trading and profit and loss account.

What Is Capital Expenditure?

Capital expenditure is the expenditure which in incurred to acquire a fixed asset which increases the productivity or earning capacity of the company. Such expenditure normally yields benefit beyond the current accounting period. Capital expenditure is generally of a one-off kind but its benefit is derived over several accounting periods. Capital expenditure appears generally as assets in the balance sheet. Capital expenditure is non-recurring in nature.

Examples Of Capital Expenditure:-

Following are some of the common examples of capital expenditure:-

  • Cost of machinery purchased
  • Installation charges of machinery purchased
  • Customs duty on imported machinery
  • Expenses on a foreign tour to purchase machinery
  • Legal expenses to acquire a building
  • Expenses to obtain a license for starting a factory
  • Cost of improvement in electric wiring system
  • Purchase of a patent right
  • Purchase of technical know-how
  • Repair of a second-hand machine before put to use.

What Is Revenue Expenditure?

Revenue expenditure is the expenditure which is incurred to carry out the normal day-to-day activities of the company. They are incurred to maintain existing productivity or earning capacity of the company. Revenue expenditure does not yield benefit beyond the current accounting period. Revenue expenditure appears generally as expenses on the debit side of trading and profit and loss account. Revenue expenditure is recurring in nature.

Examples Of Revenue Expenditure:-

Following are some of the common examples of revenue expenditure:-

  • Depreciation on assets
  • Repairs of machine after it is put to use
  • Annual maintenance charges of the machine
  • Rent paid
  • Interest paid
  • Commission paid
  • Salary paid
  • Insurance premium

Difference Between Capital Expenditure and Revenue Expenditure:-

Capital Expenditure Revenue Expenditure
Capital expenditure is incurred in acquiring fixed assets.  Revenue expenditure is incurred in carrying out normal day-to-day activities of business.
Capital expenditure is non-recurring and non-continuing in nature. Revenue expenditure is recurring and continuing in nature.
Capital expenditure helps in increasing the productivity or earning capacity of the company. Revenue expenditure helps in maintaining the existing productivity or earning capacity of the company.
Benefit of capital expenditure extends to many accounting periods. Benefit of revenue expenditure does not extend beyond the current accounting period.
Capital expenditure usually appears on the assets side of balance sheet. Revenue expenditure usually appears on the debit side of profit and loss account.

What Is Deferred Revenue Expenditure?

Deferred revenue expenditure is the expenditure for which payment has been made or a liability has been incurred but which is carried forward on the presumption that it will be of benefit over a subsequent period or periods. It is an expenditure which is, for the time being, deferred from being charged to income. Deferred revenue expenditure appears in both the trading and profit and loss account and the balance sheet. The written off portion of deferred revenue expenditure appears on the debit side of trading and profit and loss account while the un-written portion of deferred revenue expenditure appears on the assets side of balance sheet.

Examples Of Deferred Revenue Expenditure:-

Following are some of the common examples of deferred revenue expenditure:-

  • Preliminary expenses which are incurred at the time of starting the company
  • Heavy advertising expenses to launch a new product the benefit of which will come in the future years
  • Discount on issue of shares
  • Research and development expenses

 

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