Question

Distinguish between the following:

(a) Capital Receipt and revenue Receipt

(b) Capital Profit and revenue profit

15 Feb 2018
Answer :
Word Count : 493

In general, two types of receipts occur during the course of business. Capital Receipts are described as the money brought to the business from non-operating sources like proceeds from the sale of long-term assets, capital brought by the proprietor, sum received as a loan or from debenture holders etc. In contrast revenue receipts are the result of firm’s routine activities during the financial year, which includes sales, commission, interest on investment.

Capital receipts differ from revenue receipts, in the sense that the former has no bearing on profit or loss for the financial year, whereas the latter is set off against the revenue expenses for the period. Read the article provided to you, so as to understand the difference between capital receipt and revenue receipt.

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Related Questions

Distinguish between the following:

(a) Capital Receipt and revenue Receipt

(b) Capital Profit and revenue profit

What do you mean by one sided errors? How are these errors rectified? Explain with suitable examples.

From the following Trial Balance of Sh. Raghu Ram, Prepare Trading, Profit & Loss Account for the year ended 31st December, 2017 and Balance Sheet as on that date:

Basis for Comparison Capital Receipt Revenue Receipt
Meaning Capital Receipts are 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

 

Dr. Rs.

Cr. Rs.

Purchases and Sales

375,000

4,20,000

Returns Inwards

15,000

 

Returns Outwards

 

10,000

Carriage

12,400

 

Wages and Salaries

52,600

 

Trade Expenses

2,200

 

Rent

 

12,000

Insurance

1700

 

Audit Fees

1,500

 

Debtors and Creditors

10,000

50100

B/R and B/P

3,300

2,200

Printing and Advertising

5,500

 

Commission

 

13000

Opening Stock

36,000

 

Cash in hand

18800

 

Cash in Bank

26,800

 

Bank Loan

 

20,000

Interest on Loan

1,500

 

Capital

 

2,50,000

Drawings

15,000

 

Fixed Assets

2,00,000

 

 

777,300

7,77,300

Adjustments:-

  1. Stock at the end Rs. 50,000
  2. Depreciate Fixed Assets by 8%
  3. Commission earned but not received amounts to Rs. 600
  4. Rent received in advance Rs. 1,000
  5. Allow 7% interest on Capital and charge Rs. 900 as interest on Drawings.

What is meant by closing Stock? How is it valued and shown in the final accounts?

Explain.

Explain how Bank Reconciliation Statement is Prepared with an adjusted balance of cash book?

What are the various forms of business organization? Explain.

Write short notes on any two of the following:

(a) Going Concern Concept

(b) Full Disclosure Concept

(c) Consistency Concept

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