Capital Gains
A capital gain is the profit you make when you sell an asset (like stock, real estate, or equipment) for more than you paid for it. Capital gains are taxed differently than ordinary income.
Capital Gains Definition
A capital gain occurs when you sell an asset for more than its purchase price (cost basis). The gain is the difference between the sale price and what you originally paid, minus any improvements or selling costs.
Short-Term vs. Long-Term
Capital Gains for Businesses
Businesses encounter capital gains when selling:
How Capital Gains Show Up in QuickBooks
When you sell a fixed asset in QuickBooks, the gain or loss is calculated as: Sale Price – Book Value (original cost minus accumulated depreciation). Record the sale with a journal entry or through the asset disposal process.
FAQ
Q: Are capital gains different from regular business income?
A: Yes. Capital gains come from selling assets, not from your regular business operations. They're reported separately on your tax return and may qualify for lower tax rates if long-term.
Related Terms
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Related Terms
A fixed cost is a business expense that stays the same regardless of how much you produce or sell. Rent, insurance premiums, and salaried employee wages are classic examples. Whether your revenue doubles or drops to zero, fixed costs remain constant over a given period.
A compound entry is a journal entry that involves more than two accounts — one account is debited while two or more accounts are credited, or one account is credited while two or more accounts are debited. It's more complex than a simple entry (which involves just two accounts) but allows you to rec
A liability is a debt or obligation that a business owes to outside parties. Liabilities represent claims against the company's assets and include accounts payable, loans, credit card debt, accrued expenses, and deferred revenue. They appear on the Balance Sheet and are classified as either current
Net assets is the difference between total assets and total liabilities — it's what your business is worth on paper. For nonprofits, net assets replace the concept of equity or retained earnings.
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