Difference between capital loss and revenue loss

Capital loss

Capital loss may be defined as the loss relating to sale of any fixed asset or any other financial loss like premium given on repayment of debentures or bonds, or discount on issue of shares and debentures. Capital loss may explain with many other examples

Ist Example

Suppose, if any machine’s book value is $ 50000 and sell it on $ 40000 and $ 10000 is loss on sale of machinery, this is called capital loss.

2nd Example

Suppose, if a company has 100 debentures of other company and each debenture is of $ 100 but these debentures are sold at $ 80 per debenture, so company is getting loss on sale of debenture of $ 2000. This is capital loss.

In profit and loss account of company, we can not show any capital loss. In other words these losses can not be debited in Profit and loss account of company. These all losses will show in assets side of balance sheet of company. After this, it is written off by dividing number of fixed years and transferring to profit and loss account. If you know what is mean of written off , then , I can also explain it , written off means that part of any expenses or loss which is transferred from balance sheet to profit and loss account for closing the account of loss or expenses , specially capital losses .

Revenue losses

Revenue losses include all losses which happen due to operating any business activity. It includes cash discount on sale, depreciation, loss due to falling of market prices. So, these losses will show in the debit side of profit and loss account of company. It is deemed that when we start the different activities of our business , many losses are happen , so it should be closed by transferring all these losses to profit and loss account .

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Accounting Education: Difference between capital loss and revenue loss
Difference between capital loss and revenue loss
Accounting Education
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