CMA Foundation · Fundamentals of Financial and Cost Accounting · Capital and Revenue Transactions
Which of the following receipts of a trading firm is a capital receipt?
Additional capital introduced by the proprietor is a capital receipt, because it increases the owner's investment in the business and is not earned from regular operations. Sale proceeds, commission and interest on deposits are income from ordinary activities, so they are revenue receipts.
- ASale proceeds of goods in the ordinary course of business
- BCommission received from a supplier for sales promotion
- CInterest received on a bank fixed deposit
- DAdditional capital introduced by the proprietorCorrect
Explanation
A capital receipt arises from owner's investment, borrowing or sale of a fixed asset and does not come from normal trading. Capital brought in by the proprietor increases the owner's equity, so it is a capital receipt. Sales, commission and interest are earned in the normal course and are revenue receipts.
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