Capital receipt is one which is invested in the business for a long period. It includes long term loans obtained from others and any amount realized on sale of fixed assets. It is usually non-recurring in nature. Capital receipts are a non-recurring incoming cash flow into your business, which leads to the creation of a liability (a debt to be paid in the future) and a decrease in company assets (resources that lead to capital gain). This refers to those receipts which either create a liability or cause a reduction in the assets of the government. They are non-recurring and non-routine in nature.
Capital payments consist of capital expenditure on acquisition of assets like land, buildings, machinery, equipment, as also investments in shares, etc.
Characteristics
- Amount is not received in the normal course of business.
- It is non-recurring in nature.
Examples
- Capital introduced by the owner
- Borrowed loans
- Sale of fixed asset.
