Forums
Back
What is capital profit and revenue profit
Accountancy
What is capital profit and revenue profit
Answers (4)
Capital Profits : These Profits do not accrue in day to day business operations. Non-recurring in nature. Profits from Sale of fixed assets like Land and buildings, Plant and Machinery or Sale of Intangible assets like Trademarks, Licences are Capital Profits. Revenue Profits : Profits from day to day business operations such as Sale of goods and services, Commission, etc. These Profits are frequent (recurring) in nature.
Capital Profit Definition: Capital profit is the profit earned from activities that are not part of the regular business operations. These profits are usually non-recurring and arise from transactions involving the capital structure of the business. Example: A company sells a piece of machinery that it no longer needs. If the machinery was purchased for ₹3,00,000 and it is sold for ₹4,00,000, the company makes a capital profit of ₹1,00,000. This profit is not part of the company's regular sales revenue from its core business activities. Revenue Profit Definition: Revenue profit is the profit generated from the regular business activities or operations. This type of profit is recurring and forms the core income for the business from its day-to-day activities. Example: A retail store buys goods for ₹2,00,000 and sells them for ₹3,00,000. The revenue profit is the difference between the sales revenue and the cost of goods sold, which is ₹1,00,000. This profit is part of the store's normal operations and contributes to its overall income from regular sales activities. In summary: Capital profit comes from non-recurring transactions involving the capital assets of a business, such as selling an old piece of equipment. Revenue profit comes from the regular, recurring operations of the business, such as selling merchandise in a retail store.
