Nature of Transactions
The business transactions, which provide benefits or supply services to the business concern for more than one year or one operating cycle of the business, are known as capital transactions. The transactions which relate to capital are again sub-divided into capital expenditure and capital receipt
Capital expenditure consists of those expenditures, the benefit of which is carried over to several accounting periods. In other words the benefit of which is not consumed within one accounting period. It is non-recurring in nature.
Capital receipt is one which is invested in the business for a long period. It includes long term loans obtained from others and any amount realised on sale of fixed assets. It is generally non-recurring in nature.
Capital profit is the profit which arises not from the normal course of the business. Profit on sale of fixed asset is an example for capital profit.
Capital losses are the losses which arise not from the normal course of business. Loss on sale of fixed asset is an example for capital loss.