Capital Earnings and Profits Revenue: Capital earnings which is earned on the sale of the fixed assets, The profit which is made during the ordinary course of company is called revenue earnings. Following are the main distinctions between capital revenue and earnings profit. Capital profit is earned by offering assets, shares and debentures at a rate more than their book value and stated value. Income earnings is earned in the common course of business. understand more …
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Capital and Earnings Profits:
While preparing the final accounts, distinction has actually to be made between capital profits and revenue earnings. They appear in the revenue and loss account and are available for distribution as revenue, or for creating reserves and funds, or for being utilized in the business. Capital profits are either capitalized i.e. transferred to capital account or moved to capital reserve account which may be utilized for meeting capital losses.
Mode Of Making: Capital revenue is earned by selling assets, shares and debentures at a rate more than their book value and stated value. Earnings earnings is earned in the regular course of business.
Distribution: Capital profit is not readily available for the distribution to shareholders as dividend. Profits profit is readily available for the circulation to shareholders as dividend.
Capital revenue consists of:
- earnings made on the sale of set possessions( excess of selling rate over the expense rate).
- The premium on concern of securities.
- Profit from the absorption of another firm.
- Discount rate on redemption of securities.
- Revenues prior to incorporation.
- Revenue staying on Re-issue of forfeited shares.
Revenue revenue includes:
- Discount got.
- Make money from the sale of items.
- Commission got.
- Interest received.
- Revenue on the sale of fixed assets ( excess of expense overwritten down value).
- Revenue on sublet.
- Accrued Liabilities
- Capital Structure
- Book Keeping
- Interest on Capital
- Accounting Estimates
- Double Entry System
- Capital Losses and Income Losses
- Capital Investment and Income Expense
- Capital Receipts and Profits Receipts