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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2019
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Jan. 6
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Purchased goods from Henry for ₹ 50,000 on 10% trade discount and 4% cash discount and paid 60% amount by cheque. |
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Jan. 15
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Bought goods from Amit for ₹ 2,00,000 at terms 5% cash discount and 20% trade discount. Paid $\frac{3}{4}\text{th}$ of the amount in cash at the time of purchase.
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| Jan. 18 | Sold goods to Sherpa at the list price of ₹ 50,000 less 20% trade discount and 4% cash discount if the payment is made within 7 days. 75% payment is received by cheque on Jan. 23rd. |
| Jan. 25 | Sold goods to Garima for ₹ 1,00,000, allowed her 20% trade discount and 5% cash discount if the payment is made within 15 days. She paid $\frac{1}{4}\text{th}$ of the amount by cheque on Feb. 5th and 60% of the remainder on Feb. 15th in cash. |
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₹
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(a)
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Kunal started business with cash
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2,50,000
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(b)
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He purchased furniture for cash
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35,000
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(c)
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He paid commission
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2,000
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(d)
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He purchases goods on credit
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40,000
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(e)
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He sold goods (costing ₹ 20,000) for cash
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26,000
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