Capital & Revenue Receipts (Cambridge International IGCSE Accounting)

Capital & revenue receipts

What are capital receipts?

• A capital receipt is money that is received from activity which is not part of a business' day-to-day trading

  • These are one-off receipts of money

• Capital receipts include:

  • Capital introduced to the business by the owner(s)
  • Money received from a loan
  • The proceeds from the sale of a non-current asset

• Capital receipts affect the statement of financial position

  • They could affect the non-current assets

    • The sale of a non-current asset reduces the value of these assets

  • They could affect the current assets

    • Money in the bank could increase

  • They could affect the non-current liabilities

    • Taking out a bank loan increases the amount owed

  • They could affect the capital

    • If capital is introduced into the business, the value of capital increases

• Capital receipts are not included in the statement of profit or loss

Exam Hint The total proceeds from the sale of a non-current asset do not appear on the statement of profit or loss. However, an amount for the profit or loss from the sale does appear on the statement of profit or loss as an income (profit) or an expense (loss). The profit or loss is calculated using the current net book value of the asset, not the original cost.

What are revenue receipts?

• A revenue receipt is money that is received from the day-to-day trading of the business

  • These are regular receipts of money

• Revenue receipts include:

  • The sale of goods
  • Commission received
  • Rent received
  • Interest received

• Revenue receipts are included in the statement of profit or loss

  • They are not included in the statement of financial position
  • However, they will contribute to the profit or loss for the year, which is reported in the statement of financial position