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.
In case the amount of capital losses is more than the capital profit, then the excess amount is shown on the Assets side of the Balance Sheet. When the assets of a firm are sold at a price lesser than their book values, then the amount lost in excess of the book value is regarded as a capital loss.
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.