Capital receipts, like capital expenditures, do not affect profit; and are either shown as a Liability, or, more often, as a reduction from the Assets. Revenue receipts, like revenue expenditures, affect the P & L A/c and are shown on the credit side.
It shall be noted that any excess realisation over the W. D. V. (or Book Value) of an asset shall be treated as a revenue receipt (and yet due taxes have to be paid thereon, since the excess will be considered as capital gains for tax purposes).
Capital receipts include, e.g. capital invested by owners of the business, amounts received from sale of fixed assets or investments, conversion into cash of any asset EXCEPT STOCK and any loans (short, or long, term) received (as well as by debentures, bonds, etc.).
Revenue receipts include, e.g! amount from sale of goods [produced as in the line(s) of business], amount received from rendering services to other parties, or interest received, or commission received.
It must, however, be brought out that categorical distinction between capital receipts and revenue receipts is hardly possible. At the same time, it must be understood that distinction is needed for income determination and for taxation purposes. For this purpose, the fact is recognised that revenue receipts do not need to be returned to anyone.
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