Question

Distinguish, with the help of example between Capital Profits ad Revenue Profits.

Answer 1

Basis of Distinction	Capital Profit	Revenue Profit
Meaning	Capital profit refers to the profit a company makes from selling assets, shares or debentures.	Revenue profit refers to the difference between revenue income and expenses. It occurs during normal company operations.
Mode of Earning	Capital profit is achieved by selling assets, shares and debentures at a higher price than their book and face value.	Revenue profit is gained in the normal course of business.
Distribution	Shareholders cannot get dividends from capital profits.	Revenue profits can be distributed to shareholders as dividends.
Use	Capital profits are transferred to the capital reserve and utilised to cover capital losses.	Revenue profits are used to pay dividends, establish reserves, and support different purposes.
Treatment	Capital profit is recorded as a capital reserve on the balance sheet under liabilities.	Revenue profit is recorded as a debit balance in trading and profit and loss accounts, and as an accumulated loss on the balance sheet.