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Question
A receipt is a capital receipt because ______.
Options
The amount involved is large.
The amount is received in lump sum.
The amount relates to fixed assets.
Solution
A receipt is a capital receipt because the amount relates to fixed assets.
Explanation:
Capital receipts involve creation of a liability or reduction in the value of fixed assets.
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RELATED QUESTIONS
Distinguish between capital and revenue expenditure and state whether the following statements are items of capital or revenue expenditure:
- Expenditure incurred on repairs and whitewashing at the time of purchase of an old building in order to make it usable.
- Expenditure incurred to provide one more exit in a cinema hall in compliance with a government order.
- Registration fees paid at the time of purchase of a building.
- Expenditure incurred in the maintenance of a tea garden which will produce tea after four years.
- Depreciation charged on a plant.
- The expenditure incurred in erecting a platform on which a machine will be fixed.
- Advertising expenditure, the benefits of which will last for four years.
Write any two differences between:
Capital and Revenue Receipts
Fees and commission received for services rendered, interest and dividend received an investment are examples of ______.
Rent received and commission received are examples of ______.
______ involves creation of liability and is shown on the liabilities side of the balance sheet.
Define Capital receipts.
Give two examples of Capital receipts.
Premium paid on issue of shares is a capital receipt.
A receipt in substitution of an income is revenue receipt.
Any lump sum receipt is always a capital receipt.
