Capital Appreciation

Capital appreciation is the increase in the value of fixed asset. For example, value of your commercial land was Rs. 5,00,000 in 2015 and in 2016, its value is Rs. 7,00,000. Rs. 2,00,000 is capital appreciation.

Capital Appreciation Vs Capital Gain

Capital appreciation will be increase in the price of your fixed asset due to market changes. Means, demand of your fixed asset increased and supply has decreased. But capital gain will be on the selling of your fixed asset. It may be on the basis of deal with buyer. If buyer does not know the market price of your fixed asset, you can sell your fixed asset at higher profit. So, this profit will capital gain not capital appreciation.

Capital Appreciation Vs Currency Appreciation 

Capital appreciation is different from current appreciation. Currency appreciation is the increase in the value of currency if we compare it with other currency. Capital appreciation may happen due to currency appreciation. But for currency appreciation, there may be international factors which affect any country's currency.


How to Calculate Capital Appreciation

Following are simple steps to find capital appreciation.

1. Calculate Current Market Value of fixed asset
2. Calculate Current cost of Fixed Asset
3. Capital Appreciation = Current Market Value of Fixed Asset - Current Cost of Fixed Asset

Except land and property, there may be capital appreciation in the shares and mutual funds.

Reference of eBook : Dictionary of Accounting