Can You Explain The Difference Between Revenue Reserves And Capital Reserves?


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Anonymous Profile
Anonymous answered
Revenue reserve are amount set aside from the profit earned by the business to  1)strengthen the resources of the business  2) protect the business against a sudden loss of profit which in turns will erode the ordinary share capital as well as to  3) equalize the rate of dividend in future.    Meanwhile,  Capital Revenue arises due to capital transactions or non profit and loss related i.e share premium, revaluation reserves etc.  It is no available for dividend declaration as dividends can only be distributed from realized profit.  It can be use for scrip issue of shares and other uses for instance , offsetting the cost of share issue.    Hth =]
Aisha Profile
Aisha answered
Revenue reserves are the reserves represented by retention of profits. Sometimes they are labelled profit & loss account on the Balance Sheet. And a capital reserve is a type of account on a company's balance sheet that is reserved for long-term capital investment projects or any other large expense that will be incurred in the future.
Anonymous Profile
Anonymous answered
Revenue Reserves are finance arising from Trading Activities, e.g. Retained Earnings.

Capital Reserves are finance that arises through Non-Trading Activities, e.g. Revaluation Reserve

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