Home page               Download material                Accounting topics                Accounting dictionary                Financial calculators

Home Capital and Revenue Items Capital and Revenue Profits and Losses
 
 

Capital and Revenue Profits and Losses:

Capital Profits:

Capital profit is a profit which is earned, on the sale of a fixed asset or profit earned on raising capital for a company (by issuing shares at premium). This is not a regular profit of the business and is not earned in the ordinary trade of the business. For example, if a machinery having book value of $50,000 is sold for $60,000, the profit of $10,000 will be a capital profit. In the same way, a joint stock company issues shares of $ 2,00,000 at a premium of $10,000 to raise capital, such premium of $10,000 will be a capital profit.

In this connection the distinction between capital receipt and capital profit may be noted. A machinery of $50,000 is sold for $60,000. Here capital receipt is $60,000 and capital profit is $10,000. This type of profit is not recurring and regular. It will be shown on the liability side of the Balance Sheet under the head "Capital Reserve".

Revenue Profits:

This is a profit which is earned during the ordinary course of business e.g. profit on sale of goods, rent received, interest received etc.

Capital Loss:

This is a Joss suffered by a business on the sale of a fixed asset or it is incurred on raising capital of a joint stock company. This is not a recurring loss and is not made in the ordinary course of the business. e.g. A machinery having book value of $50,000 is sold for $45,000, the loss of $ 5,000 is a capital loss. In the same way, a company issued shares of $1,00,000 at 10% discount, the loss of $10,000 (10% of $1,00,000) is a capital loss. Capital loss is sown in the Balance Sheet on the asset side as a fictitious asset which is gradually written off out of the profits every year.

Revenue Loss:

This loss is made in the ordinary course or day to day operation of a business such as loss on sale of goods etc. Revenue loss appears in the profit and loss account or income statement in the year in which it occurs.

Relevant Articles:

Capital Expenditures

Revenue Expenditures
Difference between Capital Expenditure and Revenue Expenditure
When Revenue Expenditures are not regarded as Revenue Expenditures?
Principles for making distinction between Capital and Revenue Expenditure
Capital and Revenue Receipts
Capital and Revenue Profits and Losses
Capital and Revenue Payments

 

 

A D V E R T I S E M E N T

 

Financial Accounting Topics


  Introduction to Accounting
 ----------------------------------------------------------------------------
  Transactions and Accounting Equation
----------------------------------------------------------------------------
  Analysis of Business Transactions
----------------------------------------------------------------------------
  Journal, Ledger and Trial Balance
----------------------------------------------------------------------------
  Accounting for Bills of Exchange
----------------------------------------------------------------------------
  Special Journals
----------------------------------------------------------------------------
  Cash Book
----------------------------------------------------------------------------
Bank Reconciliation Statement
----------------------------------------------------------------------------
  Final Accounts
----------------------------------------------------------------------------
  Work Sheet
----------------------------------------------------------------------------
  Capital and Revenue Items
----------------------------------------------------------------------------
  Valuation of Inventories
----------------------------------------------------------------------------
  Accounts of Non-profit Making Organizations
----------------------------------------------------------------------------
  Statement of Cash Flows
----------------------------------------------------------------------------
  Accounting Ratios Analysis
----------------------------------------------------------------------------
  Depreciation, Provisions and Reserves
----------------------------------------------------------------------------
  Accounting Dictionary
----------------------------------------------------------------------------
  Financial Calculators
 
 
 
Managerial Accounting Topics

  Financial Statements
----------------------------------------------------------------------------
  Cost Volume Profit Relationship
----------------------------------------------------------------------------
  Variable Costing System
----------------------------------------------------------------------------
  Materials and Inventory Cost Control
----------------------------------------------------------------------------
  Activity Based Costing System
----------------------------------------------------------------------------
  Standard Costing and Variance Analysis
----------------------------------------------------------------------------
  Balanced Scorecard
----------------------------------------------------------------------------
  Capital Investment Analysis/Capital Budgeting
 

 

 

Home                         Download material                         Contact us                         Privacy policy                         Link to us                         Advertise

Copyright 2011