The term capital appreciation refers to the increase in the capital investment made in any asset or the upwards revaluation in the value of the asset. It is calculated to be the difference between its value from the time of investment made till a later period of time when the asset is liquidated or revalued.
The pace of capital appreciation depends on the nature of the investment. Some liquid investments like equities, gold, mutual funds, bonds, etc. take relatively lower time for capital appreciation as compared to heavy assets or investments like real estate.
Accounting treatment of capital appreciation
Capital appreciation is not necessarily to be included in the balance sheet of an organisation. However, if done so, such appreciation will be credited to a separate account in the revaluation reserve.
