In business you find out that money isn't just money. Some money is capital and some money is revenue. Capital receipts come from selling assets, and revenue receipts come from selling goods and services, and the tax collector wants to know whether it is capital or revenues you are talking about when you talk about money.
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Money that has been invested, earned or loaned to a company that is to be used in the pursuit of the business of that company is called capital. The sale of assets, such as a building, also produces capital and if there is a profit in the sale, capital gains.
Money that the company receives as a result of selling products and services is called revenue, revenue receipts or sales receipts. Revenue is income.
Capital comes from sources other than the company's business of selling or performing services for pay. Revenue is the pay that is received for those services or products.
Capital is taxed at a different rate than income. Capital gains on the sale of assets held for a short term are taxed as income but gains on the sale of assets held for a long term are taxed at a much lower rate.
The details of capital gains taxation change from time to time so it is best to check with your accountant before making any decisions involving capital gains taxation.
The money invested in your company, through actual cash investment or through sweat equity--work that is paid in shares of stock rather than cash--is called the capitalisation of your company.
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