GENERAL KNOWLEDGE

Detailed explanation-1: -The distinction between capital receipt and revenue receipt is important because capital receipt is taken to the Balance Sheet and revenue receipt is taken to the Trading and Profit and Loss Account. Capital receipts are the receipts which are not obtained in course of normal business activities of the enterprise.

Detailed explanation-2: -Explanation: Capital expenditure is shown in the Balance Sheet, in asset side, and in the Income Statement (depreciation), but Revenue Expenditure is shown only in the Income Statement. Capital Expenditure is capitalized as opposed to Revenue Expenditure, which is not capitalized.

Detailed explanation-3: -On a balance sheet capital receipt is shown on the liability side.

Detailed explanation-4: -Answer : Capital expenditure is shown in the balance sheet because a capital expenditure is considered as investment in a given company, it should be recorded as an asset on the company’s balance sheet.