Question

why is distinction between capital and revenue important?give examples to show how wrong classification can affect the ascertainment of profit.

Answer 1

we know the capital equal to assets minus liabilities where as revenue is the amount which is incurred after the subtraction of capital ok so there is a big difference between revenue and capital also if we classify supposed the items of capital nature in revenue then the cost of revenue will be more...and therefore difficulty in ascertainment of profit...as revenue is always less than capital...