Difference Between Capital Reserve
and General Reserve:
Learning Objective:
What is the difference between
capital reserve and general reserve?
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.
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.