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What is difference between the capital reserve and revenue reserve?

Finance
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Question added by Muhammad Fiaz , GROUP MANAGER ACCOUNTS, FINANCE AND TAX , SMPL Group of Companies
Date Posted: 2014/06/22
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Divyesh Patel
by Divyesh Patel , Assistant Professional Officer- Treasury , City Of Cape Town

Capital Reserve

  1. Capital reserve is used to meet capital losses.

  2. Does not indicate the operating efficiency of the business.

  3. Does not exist if there is no capital profit.

Revenue Reserve

  1. Revenue reserve is used to strengthen the financial position, distribute dividend, replace fixed assets, and redeem liabilities.

  2. Indicates the operating efficiency of the business.

  3. Revenue reserve may exist even if there is loss in a particular year.

 

Mubashir Shahzad
by Mubashir Shahzad , Oracle Functional Consultant/ERP Business Analyst , Jaffer Business System

capital reserve(surplus/deficit) is the amount head which comes in equity side of balance sheet.capital reserves movement includes selling of fixed assets(gain/losses), revaluations of buidlings, lands, fair value adjustments. it DOES not inlclude normal trading activites that result in business profit or loss.

capital reserves are usually regarded as lock boxes that are used to balnce up equity section, and they are distributed in to owners.plz like the answer.

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