Which of the following is the correct explanation of the term 'Capital Receipts"?

Question

Question

This question was previously asked in

RRB NTPC CBT 2 (Level-2) Official Paper (Held On: 16 June 2022 Shift 3)

The receipts that do not lead to a claim on the government
The receipts of the government which create liability or reduce financial assets
The receipts of the grants given to state governments and other parties
The receipts of the government which result in the reduction of financial liabilities

Answer 1

The correct answer is The receipts of the government which creates liability or reduce financial assets.

Key Points

Capital receipts are the income received by the company which is non-recurring in nature. They are part of the financing and investing activities rather than operating activities.
They also refer to incoming cash flows. Capital receipts can be both non-debt and debt receipts.
Loans from the general public, foreign governments and the Reserve Bank of India (RBI) form a crucial part of capital receipts.
Contributions into the business by the proprietor, loans taken from banks and amount received on issue of share capital are capital receipts.

Additional Information

Revenue receipts are those receipts that do not lead to a claim on the government.
- They are hence termed non-redeemable.
- They are classified into tax and non-tax revenues.
Capital receipts are receipts that create liabilities or reduce financial assets.
- They also refer to incoming cash flows.
- Capital receipts can be both non-debt and debt receipts.