Revenue reserve and capital reserve both are part of reserves in any company. Both are useful for surviving the business in the losses. But there are basic differences between revenue reserve and capital reserve which we can explain in following ways.
|Basis of Difference|
| Capital Reserve|
|1. Definition||It is the reserve which is created out of the net profit of the business. This reserve is kept for distribution of dividend.||It is the reserve which is created out of capital profit.|
Our net profit is $ 15000. Out of this, we have transferred $ 10,000 to revenue reserve.
For example, we sold the fixed assets and in selling of fixed assets, we gained $ 10,000. Out of this, we made $ 8000 capital reserve.
|3. Uses ||Revenue reserve can be used for payment of dividend and for covering of future losses.||This reserve can be used for covering capital losses. If we have any capital loss, it will decrease the capital. Instead of decreasing capital, we will decrease our capital reserve in balance sheet. This reserve can not be used for dividend payment.|
|4. Objective||Main objective of this reserve creation is to written off the unforeseen losses.|
Main objective of this reserve creation is to written off of capital losses.