Differences Between Capital Reserve And Revenue Reserve

Following are the main differences between capital reserve and revenue reserve

Source

Capital profit is the source of capital reserve. Revenue profit is the source of revenue reserve.

Use

Capital reserve is used to meet capital losses. Revenue reserve is used to strengthen the financial position, distribute dividend, replace fixed assets, and redeem liabilities.

Indication

Capital reserve does not indicate the operating efficiency of the business. Revenue reserve indicates the operating efficiency of the business.

Existence

Capital reserve does not exist if there is no capital profit. Revenue reserve may exist even if there is loss in a particular year.