(i) Capital receipts and revenue receipts:
Capital receipts refer to the inflow of funds that result in the creation or acquisition of an asset or reduction in liabilities, resulting in long-term benefits to the entity. These receipts are not recurring in nature and are generated by selling fixed assets, issuing long-term loans, or raising share capital. Examples of capital receipts include the sale of shares, long-term loans, and proceeds from the sale of fixed assets.
Revenue receipts, on the other hand, refer to the inflow of funds that are generated through the regular operations of the business. They are recurring in nature and are earned from the sale of goods or services, interest received on investments, or rent earned from leasing out assets. Examples of revenue receipts include sales revenue, interest income, rent, and commission earned.
(ii) Capital profits and revenue profits:
Capital profits refer to the profits earned from the sale of capital assets like land, buildings, or long-term investments. Capital profits are not recurring and are earned when the entity sells its fixed assets at a price higher than its purchase price. These profits are also known as capital gains.
Revenue profits, on the other hand, refer to the profits earned from the regular operations of the business. These profits are recurring in nature and are earned from the sale of goods or services. Revenue profits are also known as operating profits.
(iii) Capital losses and revenue losses:
Capital losses refer to the losses incurred from the sale of capital assets or long-term investments. These losses are not recurring and are incurred when the entity sells its fixed assets at a price lower than its purchase price. Capital losses are also known as capital losses.
Revenue losses, on the other hand, refer to the losses incurred from the regular operations of the business. These losses are recurring in nature and are incurred from the sale of goods or services. Revenue losses are also known as operating losses. Examples of revenue losses include the cost of goods sold, salaries, and depreciation.