Question
Distinguish between Revenue Reserves and Capital Reserves.
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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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i.
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Business started with cash
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1,75,000
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ii.
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Purchased goods from Rohit
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50,000
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iii.
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Sold goods on credit to Manish (costing ₹ 17,500)
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20,000
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iv.
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Purchased furniture for office use
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10,000
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v.
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Cash paid to Rohit in full settlement
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48,500
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| vi. | Cash received from Manish | 20,000 |
| vii. | Rent paid | 1,000 |
| viii. | Cash withdrew for personal use | 3,000 |
| (₹) | ||
| i. | Brij Mohan commenced business with Cash | 1,00,000 |
| ii. | Bought goods for Cash | 60,000 |
| iii. | $\frac{1}{3}\text{rd}$ of the above goods sold at a profit of 20% on cost. Half the payment recieved in Cash | |
| iv. | Purchased typewritter for office use | 15,000 |
| v. | Purchased goods on Credit from X | 25,000 |
| vi. | Paid to X | 15,000 |
| vii. | Paid Salary | 3,000 |
| viii. | Received commission | 500 |
| ix. | Sold goods for Cash (Cost ₹ 50,000) | 60,000 |