Capital Asset is defined to include property of any kind held by an assessee, whether connected with his business or profession

or not connected with his business or profession. It includes all kinds of property, movable or immovable, tangible or intangible, fixed or circulating. Thus, Land and building, plant and machinery, motorcar, furniture, ewellery, route permits, goodwill, tenancy rights, patents, trademarks, shares, debentures, securities, units, mutual funds, !ero coupon bonds etc. are capital assets.

Contents

" #xcluded from the definition of capital assets $ The most specific common definitions in use are as follows % &' tax definition versus broader economic definition ( 'ee also ) *eferences

Excluded from the definition of capital assets

". Any stock in trade, consumable stores, or raw materials held for the purpose of business or profession have been excluded from the definition or profession. $. Any movable property +excluding ewellery made out of gold, silver, precious stones, and drawing, paintings, sculptures, archeological collections etc., used for personal use by the assessee or any member +dependent, of assessee-s family is not treated as capital assets. For example, wearing apparel, furniture, car or scooter, T., refrigerator, musical instruments, gun, revolver, generator, etc. is the examples of personal effects. %. Agricultural land situated in rural area. (. /"0$1 gold bonds or 21 gold bonds "345, national defense gold bond "345, issued by the central government. ). 'pecial bearded bonds, "33" /. 6old deposit bonds issued under gold deposit scheme, "333.

The most specific common definitions in use are as follows

In financial economics, capital refers to any asset used to make money, as opposed to assets used for personal en oyment or consumption. This is an important distinction because two people can disagree sharply about the value of personal assets, one person might think a sports car is more valuable than a pickup truck, another person might have the opposite taste. 7ut if an asset is held for the purpose of making money, taste has nothing to do with it, only differences of opinion about how much money the asset will produce. 8ith the further assumption that people agree on the probability distribution of future cash flows, it is possible to have an ob ective Capital asset pricing model. #ven

without the assumption of agreement, it is possible to set rational limits on capital asset value.9": In governmental accounting, or with reference to public capital or infrastructure usually managed by government, a capital asset is defined as any asset used in operations with an initial useful life extending beyond one reporting period.9$: 6enerally, government managers have a ;stewardship; duty to maintain capital assets under their control. See International Public Sector Accounting Standards for details. See Triple bottom line for widely used public sector accounting methods in which natural capital and social capital are characterized not as intangibles or externalities but as actual capital assets. In some income tax systems +for example, in the &nited 'tates,, gains and losses from capital assets are treated differently than other income. 'ale of non<capital assets, such as inventory or stock of goods held for sale, generally is taxed in the same manner as other income. Capital assets generally include those assets outside the daily scope of business operations, such as investment or personal assets. The &nited 'tates system defines a capital asset by exclusion.9%: Capital assets include all assets except inventory of supplies or property held for sale +including subdivided real estate,, depreciable property used in a business, accounts or notes receivable, certain commodities derivatives and hedging items, and certain copyrights and similar property held by the creator of the property. The &nited =ingdom has an even broader definition.9(:

US tax definition versus broader economic definition

A well<known financial accounting textbook9): advises that the term be avoided except in tax accounting because it is used in so many different senses, not all of them well<defined. >or example it is often used as a synonym for fixed assets9/: or for investments in securities.9): ?owever this advice is @uestionable beyond the &' private context. 'everal public sector standards in global use, notably triple bottom line accounting as defined by ICL#I for world cities, re@uire that employees or the environment or something else be treated as a capital asset. In this context it means something managers have a responsibility to maintain, and to report changes in value as gains or losses.92: See human capital, natural capital, triple bottom line, human de elopment theory. Capital assets should not be confused with the capital a financial institution is re@uired to hold. This capital is computed from the right<hand side of the balance sheet while assets are found on the left<hand side.9): See !asel III for a summary of how such re"uirements are proposed to be calculated.

See also

Current asset

References

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Jump up ^ #ugene >. >ama and Aerton ?. Ailler, The Theory of Finance, ?olt *inehart and 8inston +"32(,. $. Jump up ^ 6overnmental Accounting 'tandards 7oard 'tatement Bo. %(, !asic Financial Statements#and $anagement%s &iscussion and Analysis#for State and 'ocal (o ernments, paragraph "3. %.
4.

Jump up ^ $/ &'C "$$". Also see the discussion of capital gains and losses in I)S Publication **+. Jump up ^ 'ee ?A*C discussion of assets liable to capital gains tax. C Dump up toE a b c Clyde F. 'tickney and *oman L. 8eil, Financial Accounting, p. /$$. Jump up ^ Dohn Gwen #dward Clark, &ictionary of International Accounting Terms, p. 34 Jump up ^ Havid >. *obinson, ;?uman asset accounting;, 'ong )ange Planning, v. 2, i. ", >ebruary "32(, Fp. )4</5.

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CategoriesE Capital Asset >inancial economics

>inancial terminology Taxation Capital +economics,