Learning Materials For Accounting, Management , Finance And Economics.

Thursday, July 15, 2010

Concept And Meaning Of Capital Losses And Revenue Losses And Their Related Items

Concept And Meaning Capital Losses

The amount of loss suffered due to the sale of fixed assets, shares and debentures at a price less than their book value or face value is capital loss. It does not occur in the normal course of the business. It occurs in the course of selling assets and raising capital. Usually, it is shown on the asset side of the balance sheet and written off out of the capital profit.

Items relating to capital loss

* loss on sale of fixed assets
* Discount on issue of shares and debentures
* Premium on redemption of debentures
* Loss on sale of investment

Concept And Meaning Of Revenue Losses

Revenue loss occurs in the ordinary course of the business. It results due to inefficiency in operating regular activities of the business. It results from the heavy amount of operating expenses and low amount of turnover. It is shown 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.