Accounting – Capital and Revenue
I hope you found the concept of capital and revenue fruitful.
So, let’s understand this a little more. The concept and the basic reason to segregate the balances into capital and revenue indicate that there are two primary classifications to the transactions, one short term, and the other long term. We have talked about this multiple times.
As a consequence, this will lead to two primary reporting documents, one for showcasing the operation results, and the other, the long term one showcasing the strength of the business or the organization. So, the current affairs are covered in the Profit and Loss Account and its variations, for suiting the nature of the business / organization and the Balance Sheet showing the standing as on a certain date. The variations for the profit and loss account come in from the fact that different organizations will have a different nature, different objectives, products or services, profit or non-profit etc. etc.
Within each of these documents, we will also have two columns, one having the debit balances and the other credit balances.
Catch up on the next post to understand the nature of these balances.
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