Differences Between Capital Profit And Revenue Profit

Following are the main differences between capital profit and revenue profit.

Mode Of Earning

Capital profit is earned by selling assets, shares and debentures at a price more than their book value and face value. Revenue profit is earned in the ordinary course of the business.

Distribution

Capital profit is not available for the distribution to shareholders as dividend. Revenue profit is available for the distribution to shareholders as dividend.

Use

Capital profit is transferred to capital reserve and used for meeting capital losses. Revenue profit is used to distribute dividend and create reserve and fund for various purposes.

Treatment

Capital profit is shown on the liabilities side of the balance sheet as capital reserve. Revenue profit is shown as debit balance on the debit side of the trading and profit and loss accounts and on asset side of the balance sheet as accumulated loss.