Question

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

Answer 1

Capital is the amount deployed either through debt or equity in running a business. Debt capital is borrowed capital. Equity is the money put in by the stakeholders or shareholders. Capital is used for the purchase of plant & machinery, other fixed assets and raw material.
Capital is used to earn revenue, for instance through sales proceeds or by letting out hotel rooms and so on.
In ascertaining profit there would be problems, if capital and revenue is mixed up. This could lead to an unethical erosion of capital if all that comes in from sale of goods is credited as revenue and a part of it not taken as working capital that was used to produce the goods. 

Answer 2

capital is the most important thing