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Thursday, March 18, 2010

Capital Profit

Capital profits are those profits which are earned by selling fixed assets or issuing shares or debentures. They should be transferred to capital reserve account, which appear in the balance sheet as liability. The some example of capital profits are as follows:
  • Income earned by selling fixed assets in more value than its book value.
  • Income earned by issuing shares or debentures at premium.
  • Income earned by forfeiting the shares.

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