- June 13, 2017
- Posted by: marlenedubois
- Category: CPR Training
According to American Accounting Association, Committee on Accounting Concepts in addition to also also Standards, “Revenue will be the monetary expression of the aggregate of products or services, transferred by an enterprise to its customers during a period of time.”
Capital in addition to also also revenue receipts
Capital receipts of business comprise of capital contributed by partner or by the shareholders; loans ; sale proceeds of any fixed asset, etc. In case of clubs in addition to also also associations, receipts on account of life subscriptions; entry fee; government grants; legacies in addition to also also endowments are capital receipts. Revenue receipts of a business are, cash via sales, discount received, commission, interest on investment etc. In case of club etc. annual subscriptions; sale of golf clubs in addition to also also balls; receipts arising out of the premises being given to others for use on charges.
Revenue receipts are treated from the revenue account (trading in addition to also also profit in addition to also also loss account) while the capital receipts are treated from the balance sheet.
Whether a particular receipt will be capital or revenue? The following guidelines may be stated:
– Nature of receipts will be to be determined by its character from the hands of the person receiving in which not by the source via which payment was made e.g., Payment of interest out of capital, by a company still under construction will be capital expenditure for the company nevertheless revenue receipt from the hands of the person receiving in which.
– In case of an individual transaction of purchase in addition to also also sale of property the motive of the owner will decide whether the receipt will be capital or revenue e.g., A sells shares held by him as investment, in which will be a capital receipt nevertheless if A sells the shares with speculative motive in which could be a revenue receipt.
– A receipt on account of fixed asset will be a capital receipt while a receipt on account of current asset will be a revenue receipt, e.g., sale proceeds of building, plant etc., constitute capital receipt while sale of stock-in-trade will be revenue receipt.
– Where a receipt will be in substitution of a source of income in which will be a capital receipt: nevertheless if in which will be’ in substitution of income alone, in which will be a revenue receipt e.g. if a railway passenger meets with an accident in addition to also also dies or will be permanently disabled, the compensation received via the railway company will be capital receipt because in which receipt will be in substitution of source of income i.e. his life nevertheless if he will be rendered only temporarily disabled the receipt will be revenue one, as in which will be in substitution of income alone i.e. loss of earnings during the period of disablement.
Where a sum will be received for the surrender of certain right, in which will be capital receipt nevertheless where the sum received will be from the nature of compensation for loss of future profits in which will be a revenue receipt e.g., A, the lease holder of fire-clay field in addition to also also any of fire-clay goods, was prevented by the railway company for working on the field adjacent to the railway lines. Amount paid by the railway company to A will be capital receipt, because in which will be the receipt in lieu of his right to work upon the clay field.