Question

If an income is received in a lump sum it is a_____but if lump sum payment is received in instalments, it is a______

• A. Revenue receipts, Capital receipt
• B. Capital receipt, Revenue receipts
• C. Capital receipt, Capital receipt
• D. Revenue receipts, Revenue receipts

Answer 1

The correct option is A Revenue receipts, Capital receipt

Capital Receipts. Receipts of a non-recurring nature and meant for some specific purpose are known as capital receipts. They are shown in the Balance Sheet. Capital receipts are in the form of contribution from owner, loans and proceeds from sale of fixed–assists of the business. capital receipts are not available for distribution as profit.

Receipts which are recurring (received again and again) by nature and which are available for meeting all day to day expenses (revenue expenditure) of a business concern are known as "Revenue receipts", e.g. sale proceeds of goods, interest received, commission received, rent received, dividend received etc. Revenue receipts are availabe for distribution as profits, meeting revenue expenses, or creating reserve funds.

It doesn't matter whether the income or payment is received in lump sum or installment, it will not affect the nature of receipt i.e., capital receipt would be capital receipt and revenue receipt would be revenue receipt only,