Capital and Revenue Profits

Written by True Tamplin, BSc, CEPF®

Reviewed by Subject Matter Experts

Updated on March 24, 2023

Profits made by businesses fall into two categories:

  • Capital profits
  • Revenue profits

Capital Profits

Capital profits are the profits earned on the sale of fixed assets. For instance, selling a machine costing $3,000 for $4,000 generates a profit of $1,000.

Capital profits appear as a liability in the balance sheet.

Revenue Profits

Revenue profits result from trading. For instance, selling merchandise costing $6,000 for $9,000 generates a revenue profit of $3,000.

Revenue profits are transferred to the income statement of the year in which they occur because they arise out of regular and nominal business activities.

Capital and Revenue Profits FAQs

About the Author

True Tamplin, BSc, CEPF®

True Tamplin is a published author, public speaker, CEO of UpDigital, and founder of Finance Strategists.

True is a Certified Educator in Personal Finance (CEPF®), author of The Handy Financial Ratios Guide, a member of the Society for Advancing Business Editing and Writing, contributes to his financial education site, Finance Strategists, and has spoken to various financial communities such as the CFA Institute, as well as university students like his Alma mater, Biola University, where he received a bachelor of science in business and data analytics.

To learn more about True, visit his personal website, view his author profile on Amazon, or check out his speaker profile on the CFA Institute website.