Question

What do you understand by capital profit or pre acquisition profits?

Answer 1

The amount of profit earned by the business from the sale of its assets, shares, and debentures is capital profit. ... Such profit is not earned in the ordinary course of the business. It is not available for the distribution to shareholders as dividend. Such profits are transferred to capital reserve.

Answer 2

A capital gain that results from the selling of capital assets like stocks, bonds, real estate, etc. when the sale price is higher than the purchase price is known as a capital profit. The premium is the discrepancy between the selling price and the share's face value. It is not a recurrent occurrence. It is hence capital profit.

• Capital profit is the phrase used to describe a profit made when an asset of a firm is sold for more money than it originally cost.
• As an uncommon item of revenue, the profit from the sale of assets is recorded in the profit & loss statement.
• If a profit is made through the selling of shares, it is added to the Capital Reserve as a capital profit.
• While revenue gain is the profit made through the regular, everyday operations of the firm, capital gain is the profit made by selling a corporate asset for more than it originally cost.

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