What are the two examples of revenue reserves?

What are the two examples of revenue reserves?

Four examples of revenue reserve are given below:

  • General Reserve.
  • Retained Earnings.
  • Dividend Equalization Reserve.
  • Debenture redemption Reserve.

Which of the following is a revenue reserve?

Share premium account is a revenue reserve and can be utilized to distribute dividend.

What are examples of capital reserves?

Few examples of capital reserves are:

  • Cash received by selling current assets.
  • Premium earned on the issue of share and debentures.
  • Excess on revaluation of assets and liabilities.

What is revenue reserve and capital reserve with example?

A Company always receive Revenue reserve in monetary terms, whereas capital reserve is not always in monetary value. Retained earnings are a popular example of revenue reserve. The popular example of the capital reserve is a reserve created out of profits made for selling off assets of the company.

What are capital and revenue reserves?

A capital reserve is created to finance long term projects for a business. Revenue reserve is created to meet unforeseen events in a business organisation. Reserve Source. To meet the specific purpose of meeting the accounting principles. To be used as reinvestment for company.

What is the difference between capital and revenue reserves?

The primary difference between revenue reserve and capital reserve is that revenue reserve is the reserve which is created out of the profits of the company generated from its operating activities during a period of time whereas the capital reserve is the reserve which is created out of the profits of the company …

What are the types of revenue reserves?

Types of Revenue Reserve Specific Reserve: The specific reserve can further be categorized as dividend equalization reserve, workmen compensation fund, debenture redemption reserve, and investment fluctuation fund.

What are financial reserves?

Key Takeaways A reserve fund is savings or a liquid asset set aside to cover unexpected costs or future financial obligations. Many governments, financial institutions, and individuals regularly set aside funds into accounts that earn interest.

What creates revenue reserve?

Revenue reserve is created from revenue profit which is earned from the daily operations of the business. Revenue reserve is added in a profit and loss appropriation account.

How do you use revenue reserves?

The company can distribute Revenue reserve as dividends to shareholders. In contrast, the Capital reserve is used for funding a company’s project/s or for preparing for any future contingency. Revenue reserve is useful for short and mid-term urgency/requirements. The capital reserve is useful for long term purposes.

What are the examples of revenue reserve and capital reserve?

Give four examples each of ‘revenue reserve’ and ‘capital reserves’. 1. General Reserve 2. Retained Earnings 3. Dividend Equalization Reserve 4. Debenture redemption Reserve 1. Issues of shares at premium 2. Profit or issue of shares 3. Sale of fixed assets 4. Profit on redemption of debentures.

What is a revenue reserve or retained earnings?

When a company earns a lot in a year and makes huge profits, a portion of the profits is set aside and reinvested in the business. This portion is called revenue reserve or in the common term “retained earnings”. The rest of the profit is distributed to the shareholders as dividends.

What is a dividend reserve in accounting?

Similarly, dividend reserves are created to distribute dividends for the time period when the business earns below expected results. Normally, to create a journal entry for revenue reserve, an entry is created in a revenue account as a debit to retained earnings account and credit to the revenue account.

What percentage of net profit should be revenue reserve?

If a company retains $100,000 as a revenue reserve (which is 25% of the “net profit”); the net profit must be $400,000. That means revenue reserve is an indirect indicator of how operationally efficient a company is.