Entrance fee of Rs.2,000 received by Ram and Shyam Social club isa)Capital receiptb)Revenue receiptc)Capital expendituresd)Revenue expendituresCorrect answer is option 'A'. Can you explain this answer?

Question

Answer

Capital receipts are a non-recurring incoming cash flow into your business, which leads to the creation of a liability (a debt to be paid in the future) and a decrease in company assets (resources that lead to capital gain).

Answer

Capital Receipt vs Revenue Receipt:

- A capital receipt is a receipt that does not occur from the regular operations of a business, but rather through non-operating activities such as the sale of fixed assets or the issuance of shares. Capital receipts increase the capital of the business and are not included in the calculation of profits or losses.
- A revenue receipt, on the other hand, is a receipt that is generated from the regular operations of a business, such as the sale of goods or services. Revenue receipts are included in the calculation of profits or losses.

Explanation of the answer:

- In this question, the entrance fee of Rs.2,000 received by the Ram and Shyam Social club is a one-time receipt and not a regular income. Therefore, it is a capital receipt.
- The entrance fee does not arise from the regular operations of the social club, but rather from the non-operating activity of admitting new members.
- As a capital receipt, it would increase the capital of the social club but would not be included in the calculation of profits or losses.

Conclusion:

- The correct answer to this question is option A, which states that the entrance fee of Rs.2,000 received by Ram and Shyam Social club is a capital receipt.
- Understanding the difference between capital receipts and revenue receipts is important because it can affect the calculation of profits or losses and the financial health of a business.

Answer

Capital receipts refer to those receipts which either create a liability or cause a reduction in the assets of the  organization. They are non-recurring and non-routine in nature. Here the entrance fee is said to be a capital receipt because the organization can receive the entrance fee only once that is at the time of joining into the organization from its members so it is in non recurring in nature therefore option A is the correct answer

Answer

Option A is correct.
explanation: capital receipt means either creating a liabilities or reducing the assets.
capital receipts are non-recurred and not continuously happened in nature.
social club received entrance fees only once when the students entered into the club.It's not a routine work in nature.it reduce the savings or assets.

Answer

It is bcz capital receipt is a non recurring incoming cash flow and entrance fee is taken for only one time

Answer

CAPITAL RECEIPT:
Capital receipt is the income flow from the cash from the sale of fixed assets,share in the business and the issuance of a debt instrument which includes loans and bonds.

Similar CA Foundation Doubts

Classify the following expenditures and receipts as capital or revenue:Q.Entrance fee of Rs. 2,000 received by Ram and Shyam Social Club.

Classify the following expenditures and receipts as capital or revenue:Q.Subsidy of Rs. 40,000 received from the government by a manufacturing concern.

Classify the following expenditures and receipts as capital or revenue:Q.Insurance claim received on account of machinery damaged completely by fire.

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