Today, I have obtained a call from a student who want to know the clear definition of capital income. What is its meaning and how can we compare it with loan and other revenue income? So, today, I am explaining this deeply.
All the incomes which will add directly in the capital for supporting business and using for capital expenditure will be capital income.
Examples
Our net profit is the example of capital income because we directly add it in our capital for using this income for buying long term assets and used for other capital expenditures.
Second example, we can take the special donation which is given by donor for making the building. Before making the building, we can not use it for revenue expenditures.
Third example is divided. If we are not doing the business of buying and selling of shares and stocks, then divided will be our capital income otherwise it will be our revenue income.
Is Loan a Capital Income
No loan is not capital income because this is our liability. If we did not pay, creditor will sell our property for getting their loan. Interest on loan will also not our capital income. It will be our current liability.
Revenue Income Vs Capital Income
Revenue income is the income which is used for revenue expenditures like paying the bills of electricity, bills of salaries and others. Capital income is not used for such expenses. It can be used only for paying long term and short term liabilities and buying long term and short term assets.
All the incomes which will add directly in the capital for supporting business and using for capital expenditure will be capital income.
Examples
Our net profit is the example of capital income because we directly add it in our capital for using this income for buying long term assets and used for other capital expenditures.
Second example, we can take the special donation which is given by donor for making the building. Before making the building, we can not use it for revenue expenditures.
Third example is divided. If we are not doing the business of buying and selling of shares and stocks, then divided will be our capital income otherwise it will be our revenue income.
Is Loan a Capital Income
No loan is not capital income because this is our liability. If we did not pay, creditor will sell our property for getting their loan. Interest on loan will also not our capital income. It will be our current liability.
Revenue Income Vs Capital Income
Revenue income is the income which is used for revenue expenditures like paying the bills of electricity, bills of salaries and others. Capital income is not used for such expenses. It can be used only for paying long term and short term liabilities and buying long term and short term assets.
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