Diffrence Between Capital Reserve and Revenue Reserve | Capital Reserve | Revenue Reserve | #33

Capital reserve and revenue reserve are two types of reserves that are used to account for the profits or surplus of a business.

Capital reserve is a reserve that is created out of the profits or surplus of a business and is used to strengthen the financial position of the business. Capital reserve is not intended to be distributed to the shareholders or used to fund the operations of the business. Instead, it is held in reserve and can be used for a variety of purposes, such as to finance future expansion or to absorb losses.

Revenue reserve, on the other hand, is a reserve that is created out of the profits or surplus of a business and is intended to be used to fund the operations of the business. Revenue reserve can be distributed to the shareholders in the form of dividends, or it can be retained by the business and used to fund future operations.

The key difference between capital reserve and revenue reserve is the purpose for which they are intended. Capital reserve is used to strengthen the financial position of the business, while revenue reserve is used to fund the operations of the business.

In general, capital reserve is considered a more stable and long-term source of funds for a business, while revenue reserve is considered a more flexible and short-term source of funds. It is important for businesses to manage both types of reserves effectively in order to ensure their financial stability and success.

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