Capital and Revenue Losses
- Capital losses
- Revenue losses
Capital losses means losses made on the sale of a fixed asset or a loss resulting from raising money for the business.
Investment stands in the books at $48,000, is sold for $45,000, the loss of $3,000 is a capital loss. Discount on issue of shares or debentures is a capital loss. Capital loss is shown as an asset in the Balance Sheet:
Revenue losses are the losses which are incurred in the trading operation, such as the loss on sale of merchandise.
Merchandise costing $6,000 sold for $4,000, the loss of $2,000 is a revenue loss. Revenue losses appear in the income statement in the year in which they occur.
About the Author
True Tamplin, BSc, CEPF®
True Tamplin is a published author, public speaker, CEO of UpDigital, and founder of Finance Strategists.
True contributes to his own finance dictionary, Finance Strategists, and has spoken to various financial communities such as the CFA Institute, as well as university students like his Alma mater, Biola University, where he received a bachelor of science in business and data analytics.