Basic Accounting Terms
Part β 3 Β· Receipts & Expenditure
Revenue vs Capital β understanding where money comes from and where it goes
π Handwritten Class Note
CA Devesh Thakur’s handwritten note for Day 3 β save it for quick revision!
π¬ Watch Day 3 Reel on Instagram
Basic Accounting Terms β Part 3
@cadeveshthakur.official
Receipts & Expenditure explained simply β Revenue vs Capital, and Deferred Revenue Expenditure. Day 3 of 50 Days Accounting Challenge π
βΆ Watch on InstagramDay 3: Receipts & Expenditure
In Day 1 we learned the language of accounting, in Day 2 we understood Assets. Today in Day 3, we tackle two of the most important concepts in bookkeeping: Receipts and Expenditure β and more importantly, the critical distinction between their Revenue and Capital types. Getting this right is the foundation of correct financial statements! π
Receipts
Business ke paas jo bhi paisa aala hai β chahe wo Cash, Cheque ya Bank Transfer ke zariye ho. Yeh inflow of money hai.
Expenditure
Matlab wo paisa jo business kharch karta hai goods, services ya assets lene ke liye. Yeh outflow of money hai.
The Golden Rule of Classification
Both Receipts and Expenditure are classified into Revenue (short-term, recurring) and Capital (long-term, non-recurring). This classification decides which financial statement the item appears in β P&L Account or Balance Sheet.
π Four-Way Comparison
Revenue vs Capital β Receipts & Expenditure at a Glance
| Feature | Revenue Receipt | Capital Receipt | Revenue Expenditure | Capital Expenditure |
|---|---|---|---|---|
| Nature | Regular & recurring | Non-recurring | Regular & recurring | Non-recurring |
| Frequency | Happens regularly | One-time / rare | Happens regularly | One-time / rare |
| Impact | Normal business activities | Affects financial position β increases Liability or decreases Asset | Only current year benefit | Benefit >1 year, increases earning capacity |
| Long-term Impact | No long-term impact | Yes β structural change | No β consumed in year | Yes β creates long-term asset |
| Shown In | P&L Account (credit side) | Balance Sheet (Liabilities/reduces Assets) | P&L Account (debit side) | Balance Sheet (as Asset) |
| Examples | Sale of goods, Commission, Rent received | Bank Loan, Share Issue, Sale of old machinery | Salary, Office Rent | Machinery purchase, Furniture purchase |
π΅ Types of Receipts
Revenue Receipts
Regular IncomeWoh receipts jo business ki normal, day-to-day activities se aati hain. Yeh regular aur recurring hoti hain, aur inΰ€ΰ€Ύ long-term impact nahi hota business ki financial position par.
- Regular aur recurring nature β baar baar milti hain
- Normal business activities se arise hoti hain
- Inka long-term impact nahi hota
- P&L Account ke credit side mein show hoti hain
Capital Receipts
Non-RecurringWoh receipts jo non-recurring hain aur business ki financial position ko directly affect karti hain β ya toh Liability badhti hai (jab loan milta hai) ya Asset kam hota hai (jab purani asset bechte hain).
- Non-recurring β baar baar nahi hoti
- Business ki financial position (structure) ko strong karte hain
- Liability β ya Asset β karta hai
- Balance Sheet mein shown hoti hain
πΈ Types of Expenditure
Revenue Expenditure
Day-to-Day CostWoh kharch jo regular aur recurring hain aur sirf current year ka benefit dete hain. Yeh business chalane ke liye zaroori roz ke kharche hain.
- Regular aur recurring kharche
- Sirf current year ka benefit milta hai
- Earning capacity nahi badhti
- P&L Account mein show hota hai (debit side)
Capital Expenditure
Long-Term InvestmentWoh kharch jo non-recurring hain aur business ki earning capacity badhate hain. Inka benefit ek saal se zyada milta hai aur Balance Sheet mein Asset ke roop mein show hote hain.
- Non-recurring β ek baar ya kabhi kabhi hota hai
- Business ki earning capacity badhata hai
- Benefit ek saal se zyada milta hai
- Balance Sheet mein Asset ke roop mein show hota hai
Deferred Revenue Expenditure
Special CategoryYeh ek special intermediate category hai. Ek saath bada paisa kharch hota hai β lekin iska benefit kai saalon tak milta hai. Isliye ise ek saal mein poora P&L mein nahi daalte; rather, har saal ek portion P&L mein likhte hain aur baaki Balance Sheet mein rakhte hain.
- Revenue nature ka kharch hai β lekin benefit kai saalon tak
- Ek baar bada amount kharch hota hai
- Har saal ek portion P&L mein write off hota hai
- Baaki amount Balance Sheet mein dikhata hai (like Fictitious Asset)
Most Common Exam Confusion
Sale of old machinery = Capital Receipt (not Revenue Receipt!) because it is non-recurring and reduces an asset. Similarly, buying machinery = Capital Expenditure, while repairing machinery = Revenue Expenditure.
Connection with Previous Days
Day 1: Capital (owner’s investment) is a Capital Receipt. Drawings reduce it.
Day 2: Capital Expenditure creates Fixed Assets (Tangible). Deferred Revenue Expenditure creates Fictitious Assets on the Balance Sheet.
π Quick Summary β All 5 Types
| Type | Nature | Benefit Period | Shown In | Examples |
|---|---|---|---|---|
| Revenue Receipt | Regular, recurring | Current year | P&L A/c (Credit) | Sales, Commission, Rent received |
| Capital Receipt | Non-recurring | Long-term structural | Balance Sheet | Bank Loan, Share Issue, Sale of machinery |
| Revenue Expenditure | Regular, recurring | Current year only | P&L A/c (Debit) | Salary, Office Rent |
| Capital Expenditure | Non-recurring | More than 1 year | Balance Sheet (Asset) | Machinery, Furniture purchase |
| Deferred Revenue Exp. | One-time, large spend | Several years | Both P&L + Balance Sheet | Heavy Advertising, R&D |
