Question
Distinguish between Revenue Reserves and Capital Reserves.
✓
Answer
Difference between Revenue Reserve and Capital Reserve:
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Basis
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Revenue Reserve
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Capital Reserve
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1.
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Source
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It is created out of business or revenue profits.
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It is created out of capital profits.
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2.
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Usage
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It can be used for distribution of dividends without any precondition.
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It can be used for distribution of dividends only if the company satisfies creatain conditions prescribed by the Companies Axt.
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3.
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Purpose
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It is created for strengthening the financial position and meeting the unforseen contingencies or some specific prupose.
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It is created for meeting capital losser or to be used for purposes specified by the Companies Act.
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₹
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