Question

What is the deference between general reserve and capital reserve?

Answer 1

Hey mate!

Here's your answer!!

Capital Reserve:
1. It is created out of the profit earned not in the normal course of business. For example, to a bookseller, profit on sale of books is a regular profit. But profit earned on sale of something other than books is capital profit.

2. Capital employed in business is increased permanently.

3. It is usually not available for the payment of dividends.

4. Liability and loss of capital nature can only be met by it.

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General Reserve:
1. It is created out of profit earned in the normal course of business.

2. It increases capital employed temporarily.

3. It is available for the payment of dividends.

4. It is available for meeting any type of liability or loss.

Hope it helps you!