Identifying Revenue Nature Receipts

The core difference between revenue receipts and capital receipts lies in their nature and source. Revenue receipts are typically recurring, arise from normal business operations, and do not fundamentally alter the capital structure of the entity. Capital receipts, on the other hand, are non-recurring and often involve transactions related to capital assets or liabilities, significantly impacting the entity's capital base.

Analysis of Options:

• Sale of Investments: Realising money from selling investments is a capital receipt. Investments are treated as capital assets, and their sale represents a disposal of these assets, not routine income.
• Dividend Received on Investment: This is income generated from holding an investment. Dividends are typically paid periodically (e.g., quarterly, annually) and represent a return on the capital invested. Therefore, it is a revenue receipt.
• Amount Borrowed from a Bank: Loans are liabilities that need repayment. They represent an inflow of capital but create an obligation, making them a capital receipt.
• Compensation for Land Acquisition: Land is a capital asset. Receiving compensation for its acquisition is a capital receipt as it relates to the disposal or compulsory acquisition of a long-term asset.

Conclusion on Revenue Receipt:

Based on the analysis, the dividend received on investment is the only transaction listed that qualifies as a revenue receipt because it represents recurring income generated from an asset during normal operations.