Accounting is a very vast field, and there are a lot of things that are essential for maintaining accurate books and records. One of them is revenue and capital accounts. Although you can hire an accountant to help you, knowing the difference will assist in providing them with the right information. So, before approaching a Sterling Heights, MI CPA firm, this article will help you learn the key difference between the two main accounts.
What is a Revenue Account?
A revenue account for any business is an account that contains details related to the income. This account will include all revenue receipts received for the day-to-day business activities. It can be in the form of tax or non-tax income and directly impact a business’s profits. Some examples of these receipts include interest received, corporate tax, sales, etc.
What is a Capital Account?
Capital accounts for any business are the record of expenses and capital receipts. This account has information about capital assets and liabilities. The capital will be liquid assets or money used to run the business. It could be a loan taken from the market or any other external sources, such as Treasury bills borrowed from banks.
Difference Between Revenue Account and Capital Account
Listed below are some of the key differences between revenue and capital accounts:
|Parameter||Revenue Account||Capital Account|
|Definition||A revenue account for any business is an account that contains details related to the income.||Capital accounts for any business are the record of expenses and capital receipts.|
|Tenure||Short-term, generally for one financial year.||It is long-term and can extend a financial year.|
|Income Type||Includes regular income and expenses sources, such as sales, salaries, etc.||Includes non-regular sources, such as taking a loan from a bank or market.|
|Profit and Loss||It has an impact on profit and loss.||It does not have an impact on profit and loss.|
|Examples of Receipts||Sales, interest received, income tax, corporate tax||Sale of any asset, loans and borrowings, issue of shares and debentures|
|Reporting||It is reported on the income statement of the business.||It is reported on the balance sheet of the business.|
Every small or big business should be aware of how their accounts are created. Therefore, understanding the key difference between revenue and capital accounts will ensure everything is correct while entering the income and expenses.