Capital Losses and Revenue Losses, Detail of Capital and Revenue Losses

The loss suffered by a business on the sale of fixed assets, The loss suffered by the company in the regular course of company is called earnings loss.

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Capital and Revenue Losses:

Profits losses are the losses which develop throughout the typical course of company whereas capital losses are those which take place when offering fixed properties or raising share capital. When shares of the face value of Rs 101 are released at Rs 9 i.e. at a discount of Rs 1, the quantity of discount will be a capital loss.

Treatment of capital losses is not different from that of capital revenues. Simply as capital earnings are not revealed in the revenue and loss account, likewise capital losses are not shown in the earnings and loss account. If nevertheless, capital losses are huge, the common practice is to spread them over a number of years and charge a part thereof to revenue and loss account of each such year.

Triggers: Capital loss happens due to the sale of properties, share and debentures at a price less than their stated value or book value. Income loss takes place due to heavy quantity of business expenses and low turnover or sales.

Nature: Capital loss does not happen in the typical course of the business. Earnings loss takes place in the normal course of business.

Concept And Significance of Income Losses

Income loss happens in the ordinary course of the company. It is revealed as debit balance on the debit side of the trading and profit and loss accounts. It adversely affects the amount of capital and stability of the business.

The capital loss consists of:

  • Unexpected loss of set possessions.
  • Redemption of securities at the premium.
  • Embezzlement of case by the unauthorized person.

    The Income loss includes:

  • Loss by fire of unsecured items.
  • Devaluation loss on sale of depreciable possession.
  • Arrangement for skeptical financial obligations and loss of products due to the carelessness of the worker.

    Recommended

    • Accrued Liabilities
    • Limitations of Accounting
    • Devaluation Assistance Note
    • Capital Structure
    • Book Keeping
    • Interest on Capital
    • Accounting Quotes
    • Double Entry System

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