Capital Loss and Revenue loss

Published on: July 1, 2020

Capital loss is related to fixed assets and long-term liabilities.
Revenue loss is related short-term and day to day activities.

Here, Amount = Rs = $ = £ = € = ₹ = Af = ৳ = Nu = Rf = රු =

When organization sales fixed assets at less than book value or issues shares and debentures at discount, it is known as capital loss.

It occurs only when fixed assets are sold or capital raise.

Generally, it is shown is assets side of balance sheet.

It can be written off out of capital profit.

Suppose BL Traders has an old machine valued Rs 150,000.

This machine was sold for Rs 120,000.

Here, capital loss is (Rs 150,000 – Rs 120,000) Rs 30,000.

Some other capital losses are:

a. Loss on sales of fixed assets.

b. Loss on sales of investment.

c. Discount on issue of share and debentures.

d. Premium on redemption of debentures etc.

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When organization sales goods or service less than purchase value or operating expenses are more than value of goods sold, it is known revenue loss.

Revenue losses occur due to inefficiency of management.

It is shown is debit side of profit and loss account.

Some revenue losses are:

a. Sales of goods at less than purchased value.

b. Provide service at less than hired value.

c. Loss by fire or theft etc.

Bases	Capital loss	Revenue loss
Nature	It does not occur in normal business operation.	It occurs in normal business operation.
Causes	It occurs due to sales of fixed assets at loss or issue of shares and debentures at discount.	It occurs due to heavy operating expenses but low turnover/sales.
Indication	It does not indicate inefficiency of business.	It indicates inefficiency of business.
Show	It is shown in assets side of balance sheet.	Generally, It is shown in debit side of profit and loss account.