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Difference between Payments and Expenditure
Last Updated On: 31-Oct-2021Posted On: 31-Oct-2021
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[size= 12.0pt; mso-fareast-font-family: 'Times New Roman'; mso-bidi-font-family: Arial]First, let me help you interpret the difference between Receipts & Income along with the help of an example.[/size]
[b][u][size= 12.0pt; mso-fareast-font-family: 'Times New Roman'; mso-bidi-font-family: Arial]Difference between Income & Receipts [/size][/u][/b]
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[b][size= 12.0pt; mso-fareast-font-family: 'Times New Roman'; mso-bidi-font-family: 'Times New Roman']Income[/size][/b] |
[b][size= 12.0pt; mso-fareast-font-family: 'Times New Roman'; mso-bidi-font-family: 'Times New Roman']Receipts[/size][/b] |
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[size= 12.0pt; mso-fareast-font-family: 'Times New Roman'; mso-bidi-font-family: 'Times New Roman']Income refers to the [b]amount received[/b] by an entity [b]from its core business operations and day to day functioning[/b].[/size] |
[b][size= 12.0pt; mso-fareast-font-family: 'Times New Roman'; mso-bidi-font-family: 'Times New Roman']Any cash inflow[/size][/b][size= 12.0pt; mso-fareast-font-family: 'Times New Roman'; mso-bidi-font-family: 'Times New Roman'] received by an entity can be termed as receipts.[/size] |
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[size= 12.0pt; mso-fareast-font-family: 'Times New Roman'; mso-bidi-font-family: 'Times New Roman']All incomes [b]affect the statement of profit & loss.[/b][/size] |
[size= 12.0pt; mso-fareast-font-family: 'Times New Roman'; mso-bidi-font-family: 'Times New Roman']But all receipts [b]do not affect profit & loss statement.[/b][/size] |
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[size= 12.0pt; mso-fareast-font-family: 'Times New Roman'; mso-bidi-font-family: 'Times New Roman']Income includes only [b]revenue receipts[/b].[/size] [size= 12.0pt; mso-fareast-font-family: 'Times New Roman'; mso-bidi-font-family: 'Times New Roman'] [/size] |
[size= 12.0pt; mso-fareast-font-family: 'Times New Roman'; mso-bidi-font-family: 'Times New Roman']Receipts include both [b][url=https://www.accountingcapital.com/basic-accounting/capital-receipts/][color=windowtext]capital receipts[/color][/url] & [url=https://www.accountingcapital.com/basic-accounting/revenue-receipts/][color=windowtext]revenue receipts[/color][/url].[/b][/size] |
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[size= 12.0pt; mso-fareast-font-family: 'Times New Roman'; mso-bidi-font-family: 'Times New Roman']It can be [b]cash or non-cash[/b] in nature. For eg. non-cash items such as an unrealized gain from investments, profit on revaluation of fixed assets are also considered as income.[/size] |
[size= 12.0pt; mso-fareast-font-family: 'Times New Roman'; mso-bidi-font-family: 'Times New Roman']It is [b]only cash[/b] in nature.[/size] |
[b][u][size= 12.0pt; mso-fareast-font-family: 'Times New Roman'; mso-bidi-font-family: Arial]Examples of Receipts & Income[/size][/u][/b]
[size= 12.0pt; mso-fareast-font-family: 'Times New Roman'; mso-bidi-font-family: Arial]For instance, XYZ Inc. receives the following amount in the month of January 20×1. Let us differentiate the following transactions as receipts or income.[/size]
[size= 12.0pt; mso-fareast-font-family: 'Times New Roman'; mso-bidi-font-family: Arial]1. Borrowed 50,000 from a bank for establishing a new unit. 2. Amount of 10,000 received from the disposal of an old machine. 3. Amount of 600,000 received from the issue of new shares & debentures of XYZ Inc. 4. 500,000 received as consideration for the sale of goods or services. 5. Rent received 60,000 from the tenant. 6. Interest & Dividend received 15,000 from investments in Amazon Inc.[/size]
[size= 12.0pt; mso-fareast-font-family: 'Times New Roman'; mso-bidi-font-family: Arial]All the above examples can be termed as receipts but all of them cannot be termed as income. Only examples 4, 5, & 6 can be referred to as income for XYZ Inc.[/size]
[size= 12.0pt; mso-fareast-font-family: 'Times New Roman'; mso-bidi-font-family: Arial]Eg. 1, 2, & 3 are capital receipts and will not affect the statement of profit & loss of XYZ Inc. Therefore they are termed only as receipts & not income.[/size]
[size= 12.0pt; mso-fareast-font-family: 'Times New Roman'; mso-bidi-font-family: Arial]Whereas eg. 4, 5, & 6 are revenue receipts and will affect the profit & loss statement. Therefore, they can be referred to as income for XYZ Inc.[/size]
[size= 12.0pt; mso-fareast-font-family: 'Times New Roman'; mso-bidi-font-family: Arial]Now moving forward, let me help you understand the difference between payments & expenditure, with the help of an example.[/size]
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