Capital profit and Revenue profit

In order to find out the correct profit and the true financial position, there must be a clear distinction between capital profit and revenue profit.

Capital profits

Capital profit is the profit which arises not from the normal course of the business. Profit on sale of fixed asset is an example for capital profit.

Revenue profits

Revenue profit is the profit which arises from the normal course of the business. i.e, Net Profit – the excess of revenue receipts over revenue expenditures.