Classifying business receipts as capital or revenue Steps:

• Recall definitions: Capital receipts arise from non-operating sources like asset sales or special financing; revenue receipts from core trading operations.
• Analyze first receipt: In a car business, cash payments for hire refer to initial down payments in hire purchase deals, classified as capital receipts since they recover invested capital in assets.
• Analyze second receipt: Proceeds from selling an old vehicle count as revenue, as vehicles are trading stock in a car dealership, forming normal business income.
• Match to choices: First is capital, second is revenue, selecting option C.

Why C is correct:

• Per accounting standards, capital receipts include non-recurring financing like hire purchase initials (IAS 17/IFRS 16 legacy), while revenue receipts cover trading sales of inventory.

Why the others are wrong:

• A: Labels both capital, but vehicle sale is operational revenue, not capital.
• B: Labels first revenue, but hire payments are capital recovery, not operating income.
• D: Labels both revenue, but hire payments are non-operating capital.

Final answer: C