Receipts are the amounts actually received. The receipts of a business are of two kinds:

  1. Capital receipts
  2. Revenue receipts

Capital Receipts

Explanation

Capital receipts include the following:

  • Receipts from the sale of an organization’s fixed assets
  • Payments into a business either by the proprietor of the business or by shareholders of a company to start a business or increase the capital
  • Receipts of loans from partners, bankers, and private individuals
  • Amount received on account of capital profit

Capital receipts are shown as liabilities in the balance sheet.

Examples

  • Sale of old machinery for $5,000
  • Sale of 1,000 shares of common stock
  • Receipt of a bank loan

Revenue Receipts

Explanation

Revenue receipts include the following:

  • Receipts of cash from the sale of merchandise
  • Amount received on account of some revenue profit

Revenue receipts are shown as an income in the income statement in the year in which they occur.

Examples

  • Sale of goods to customers for $1,000
  • Receipt of a fee amounting to $2,000 earned from rendering a service to a client

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