State the difference between capital reserve and revenue reserve.
The major differences between capital reserve and revenue reserve are as follows −
Capital reserve
Funds to create financial long term projects/to write off capital expenses.
Created for non – trading activities.
Capital profit of the firm act as source of capital
main aim is to adhere statutory requirements/accounting principles
long term purpose
can’t be received in monetary value
used for legal purpose
utilized for purpose for which it is created
not available for dividend distribution
Revenue capital
Total amount retained to meet future contingencies.
Created for trading activities.
Revenue profit of the form act as a source.
Main aim is to meet unforeseen contingencies and improve entity’s financial position.
Short term and mid-term purpose.
Can received monetary value.
Portion is always re-invested.
Used for any or particular purpose only based type of reserves.
Dividend is distributed.
Published on 25-Jul-2020 10:16:05
