Types of Capital Receipts

There are two main types of Capital Receipts; namely, Non-debt Capital Receipts and Debt Capital Receipts.

1. Non-debt Capital Receipts: The receipts that do not create any liability on the balance sheet of an organisation are known as Non-Debt Capital Receipts. These receipts usually arise because of the transactions that increase the capital or net worth of the organisation. For example, grants received, sale of fixed assets, investments made by the organisation that is sold at a later date, etc.

2. Debt Capital Receipts: The receipts that create liability on the balance sheet of an organisation are known as Debt Capital Receipts. These receipts represent the money borrowed by the organisation that the organisation needs to pay back at some point in the future. For example, money borrowed through loans or issue of bonds, etc. Whenever an organisation borrows money, it receives cash in a lump sum which it can use for capital expenditures or other investments. However, it also creates an obligation for the organisation to repay the borrowed amount with interest, and this amount is recorded as a liability in the company’s balance sheet. 

Both these receipts are essential for the proper financial management of a company. These receipts can provide the organisation with the required funds for investments, capital expenditures, and other activities that can help the organisation grow. However, it is necessary to carefully manage the debt levels of the organisation and always ensure to have a plan for paying back the borrowed money.