Question

What is Reserve fund, Revenue reserve, Capital reserve and General reserve?

Answer 1

Capital Reserve” means the part of profit reserved by the company for a particular purpose such as to finance long-term projects or to write off capital expenses. If we reverse the words, then we get a new term“Reserve Capital”. The two terms might seem alike to a layman, but these are not one and the same thing, as they carry different meanings. Reserve Capital shows the part of the authorized capital that has not yet called up by the company and is available for drawing, if necessary.While the creation of capital reserve is mandatory for all the companies, there is no such compulsion for maintaining reserve capital. In this article excerpt, we have compiled all the important differences between capital reserve and reserve capital. Have a look.

'Reserve Fund'

A reserve fund is a savings account or other highly liquid asset set aside by an individual or business for meeting the future costs of upkeep and any unexpected costs that may arise. If the fund is set up to meet the costs of scheduled upgrades, less-liquid assets may be used. For example, condominiums often set up reserve funds in which condo owners pay a set monthly amount to maintain the quality of the condominium.


revenue reserve



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FINANCE, ACCOUNTING an amount of money received from sales that a company keeps in a special account for future needs, such as paying share holders when profits are low:


GENERAL RESERVES

When any amount is kept separate by a company out of its profit for future purpose then that is called as general reserves. In other words the general reserves are the retained earnings of a company which are kept aside out of company’s profits to meet future (known or unknown) obligations. General reserves are the part of Profit and Loss Appropriation Account.