The points of difference between Capital Loss and Revenue loss are given below.
Capital losses are those losses that are incurred from the disposal or sale of an asset and redemption of debentures. These are not incurred in the course of normal business operations and are non-recurring in nature i.e. these are not frequently incurred. The capital loss is made good or settled against the capital profits.
Revenue losses are those losses that are incurred in the conduct of ordinary and day-to-day business activities. The sale of goods and services at a price lesser than their cost price results in revenue losses. These losses are incurred frequently in the normal course of business operations. Revenue losses are shown on the debit side of the Profit and Loss Account.
Difference between Capital Loss and Revenue Loss
|Capital Loss||Revenue Loss|
|Meaning||It is the loss incurred from the disposal or sale of an asset and redemption of debentures.||It is the loss incurred from the sale of goods and services at a price lesser than their cost price.|
|Activities||These are not incurred from ordinary business activities.||These are incurred from ordinary business activities.|
|Nature||It is non-recurring in nature.||It is recurring in nature.|
|Shown||It is shown on the Assets side of the Balance Sheet.||It is shown on the Debit Side of Profit and Loss Account.|
|Set-off||It can be set off against capital profits||It cannot be set off against capital profits.|
The capital expenditure results in an income or benefits for a longer period that extends for a period of more than a year. This expenditure is shown in the Balance Sheet
A promissory note is an unconditional promise in writing given by the buyer (or creditor) to the seller (or debtor) to pay the amount of money specified therein to the seller or to the order of seller or to bearer.
The reserves that are created out of the capital profits of a business are known as Capital reserves. Capital profits are the profits that are not earned in normal business activities.
Secret reserves are those reserves that exist in the business to strengthen its financial position but are not disclosed in the Balance Sheet.