There are many types of differences and the definitions of capital and revenue profits.
The following are the explanation about Capital Profits And Revenue Profits with Examples.
Profit Arisen from Non-recurring transactions is called capital profit. capital profit should be transferred to the Capital Reserve account. Which appears on the liabilities side of the balance sheet.
Capital Profit includes:
- Profit earned on the sale of fixed assets(excess of selling price over the cost price).
- The premium on the issue of securities.
- Profit from the absorption of another firm.
- Discount on the redemption of securities.
- Profits prior to incorporation.
- Profit remaining on Re-issue of forfeited shares.
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You are here Capital Profits And Revenue Profits with Examples.
Profit earned in the ordinary course of business is Called revenue Profit.
Revenue Profit includes:
- Discount received.
- Profit from the sale of goods.
- Commission received.
- Interest received.
- Profit on the sale of fixed assets (excess of cost overwritten down value).
- Profit on sublet.