Differbetween
The primary difference between revenue reserve and capital reserve is that revenue reserve is the reserve which is created out of the profits of the company generated from its operating activities during a period of time whereas the capital reserve is the reserve which is created out of the profits of the company ...
- What is Capital Reserve and how it is different from revenue reserve Explain with examples?
- What is a capital reserve?
- What is revenue reserve with example?
- What are the 3 types of reserves?
- What is capital reserve example?
- Is General reserve a revenue reserve?
- How are reserve funds calculated?
- How is capital reserve calculated?
- Is capital reserve is a free reserve?
- How reserve is created?
- What is secret reserve?
What is Capital Reserve and how it is different from revenue reserve Explain with examples?
What is a Revenue Reserve?
| Capital Reserve | Revenue Reserve |
|---|---|
| Definition | |
| A capital reserve is created to finance long term projects for a business | Revenue reserve is created to meet unforeseen events in a business organisation |
| Reserve Source | |
What is a capital reserve?
A capital reserve is an account in the equity section of the balance sheet that can be used for contingencies or to offset capital losses. It is derived from the accumulated capital surplus of a company, created out of capital profit.
What is revenue reserve with example?
Examples of Revenue Reserve
Retained earnings can be classified as an example of revenue reserves. Suppose the business earned a net income of $12,000. The business distributed $2,000 as dividends. ... Therefore, by doing so business, the business creates a revenue reserve of $10,000.
What are the 3 types of reserves?
Reserves in accounting are of 3 types – revenue reserve, capital reserve and specific reserve.
What is capital reserve example?
Few examples of capital reserves are: Cash received by selling current assets. Premium earned on the issue of share and debentures. Excess on revaluation of assets and liabilities.
Is General reserve a revenue reserve?
Revenue reserves are portions of profits earned by a company's normal operations which are then set aside. Revenue reserves are divided into two types: General reserves: as suggested by the name, general reserves are not kept aside for any particular purpose, but for the general financial strengthening of the company.
How are reserve funds calculated?
The formula used is 1-(1+R)-n/R. This will be used to reflect the time value of periodic investments accumulated over the entire lifetime of the project. Thirdly, multiply required funds (RF) by the discount figure (D) to determine the present value (PV) of the Reserve Fund.
How is capital reserve calculated?
At the time of reissue of forfeited shares a discount of Rs 2 per share is allowed so the total amount of discount of Rs 400 is adjusted from the forfeited amount of Rs 600 and the balance amount of Rs 200 is transferred to Capital Reserve A/c being a capital gain.
Is capital reserve is a free reserve?
Reserves are classified as Statutory and voluntary ; capital and revenue ; and free and specific. ... Free reserves can be used by the company to declare dividends, to issue bonus shares, to write off accumulated losses and to write off share issue expenses. Specific reserves are those created for specific purposes.
How reserve is created?
A reserve is profits that have been appropriated for a particular purpose. Reserves are sometimes set up to purchase fixed assets, pay an expected legal settlement, pay bonuses, pay off debt, pay for repairs and maintenance, and so forth. ... The board of directors is authorized to create a reserve.
What is secret reserve?
A secret reserve is the amount by which the assets of an organization are understated or its liabilities are overstated. An entity might establish a secret reserve for competitive reasons, to hide from other businesses that it is in a better financial position than appears in its financial statements.
