Question
Distinguish between ‘revenue reserve’ and ‘capital reserve’.
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Basis of Difference
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Revenue Reserve
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Capital Reserve
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Source
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It is created out of revenue profit, i.e., revenue earned from normal activities of business operations.
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It is created out of capital profit, i.e., gain from other than normal activities of business operations, such as sale of fixed assets, etc.
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Dividend
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It can be used for dividend.
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It cannot be used for dividend.
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Purpose
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It is created for strengthening the financial position of the business.
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It is created for the purpose laid down in the Companies Act.
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Generate a complete, print-ready paper with questions like this in minutes — across 16+ boards, with answer keys.
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a.
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Started business with cash
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₹ 1,20.000
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b.
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Purchased goods for cash
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₹ 10,000
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c.
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Rent received
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₹ 5,000
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d.
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Salary outstanding
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₹ 2,000
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e.
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Prepaid Insurance
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₹ 1,000
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f.
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Received interest
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₹ 700
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g.
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Sold goods for cash (Costing ₹ 5,000)
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₹ 7,000
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h.
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Goods destroyed by fire
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₹ 500
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2017 April
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₹
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05
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Returned goods to M/s Kartik Traders
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1,200
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|
10
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Goods returned to Sahil Pvt. Ltd.
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2,500
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17
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Goods returned to M/s Kohinoor Traders. for list price₹ 2,000 less 10% trade discount.
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28
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Return outwards to M/s Handa Traders
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550
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₹
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1.
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Charge depreciation on Machinery
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20,000
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2.
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Salary due to Office Clerks
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1,00,000
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3.
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Received cash for Bad-Debts written off last year
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5,000
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4.
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Purchased goods from Ashok & Co. for ₹ 50,000 at 20% Trade Discount. Half the payment was made in cash.
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5.
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Issued cheque to Ashok & Co. in full settlement
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19,500
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6.
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Paid Life Insurance Premium by cheque
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6,000
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7.
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Proprietor used goods for household purposes
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20,000
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8.
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Goods given free to a hospital out of business
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10,000
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