The loss suffered by a company on the sale of fixed assets, The loss suffered by the business in the ordinary course of business is called revenue loss.
Capital and Revenue Losses:Revenue losses are the losses which arise during the normal course of business whereas capital losses are those which occur when selling fixed assets or raising share capital. If a building purchased for Rs 5,00,000 is sold for Rs 4,50,000, there will be capital loss of Rs 50,000. Similarly, when shares of the face value of Rs 101 are issued at Rs 9 i.e. at a discount of Rs 1, the amount of discount will be a capital loss.
Concept And Meaning of Revenue LossesRevenue loss occurs in the ordinary course of the business. It results due to inefficiency in operating regular activities of the business. It results from the heavy amount of operating expenses and low amount of turnover. It is shown as debit balance on the debit side of the trading and profit and loss accounts. It adversely affects the amount of capital and stability of the business.
The capital loss includes:
- Accidental loss of fixed assets.
- issue of securities at discount.
- Redemption of securities at the premium.
- Embezzlement of case by the unauthorized person.
- Obsolescence losses. losses by flood and earthquake etc.
The Revenue loss includes:
- Embezzlement of cash by the cashier.
- Embezzlement of goods by the storekeeper.
- Bad debts.
- Loss by fire of unsecured goods.
- Depreciation loss on sale of depreciable asset.
- Provision for doubtful debts and loss of goods due to the carelessness of the employee.