CA Foundation · Accounting · Final Accounts of Sole Proprietors
Which of the following is a revenue receipt for a sole proprietor running a cloth business?
Discount received from suppliers on prompt payment is a revenue receipt, because it arises from normal business operations and is credited to the Profit and Loss Account. Capital introduced, bank loans and sale proceeds of fixed assets are capital receipts.
- ACapital brought in by the proprietor from personal savings
- BLoan taken from a bank for working capital
- CSale proceeds of old furniture at book value
- DDiscount received from suppliers on prompt paymentCorrect
Explanation
Discount received is a gain arising from normal trading and is credited to the Profit and Loss Account, so it is a revenue receipt. Capital introduced and a bank loan are capital receipts, and the sale of a fixed asset is also a capital receipt.
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