Capital Gain
Financial Dictionary — Capital & Investment
Definition
Capital gain The portion of gross profit recognized from the sale or exchange of a non-inventory asset that is not taxed as ordinary income. Historically, capital gains have been taxed at a lower rate than ordinary income.
Use cases, Example & Why it matters
Use cases
- Used in the purchase-to-pay cycle to validate invoices, approvals, and supporting documents.
- Used to strengthen internal controls over purchasing and supplier payments.
- Used to strengthen internal controls over purchasing and supplier payments.
Example
- Example: Before payment, the AP team applies **Capital Gain** to confirm the invoice matches the approved purchase documentation.
Why it matters
- Why it matters: Prevents incorrect/duplicate payments, reduces fraud risk, and improves accuracy of payables and expenses.