NCERT Solution
Class 11
Accountancy
Depreciation, Provisions and Reserves
distinguish between lsquo revenue reserve rsquo...

Question:
Distinguish between ‘revenue reserve’ and ‘capital reserve’.

Answer:

Revenue Reserve Capital Reserve

Revenue reserve is the type of reserve that is created from the net profit that a company makes during a financial year.

This reserve is not distributed to shareholders in the form of dividends but is kept for meeting future requirements of the business.

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.

A capital reserve is the type of reserve that is created from capital profits.

The purpose for which a capital reserve is created is for preparing the company for sudden events like inflation, business expansion, funds for a new project.

A capital reserve is created from capital profit earned through sales of capital assets such as the sale of fixed assets, profit on the sale of shares.

The special property of capital reserve is that these are permanently invested and cannot be used for any other purpose apart from which it is created.

Revenue Reserve	Capital Reserve
Revenue reserve is the type of reserve that is created from the net profit that a company makes during a financial year. This reserve is not distributed to shareholders in the form of dividends but is kept for meeting future requirements of the business. 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.	A capital reserve is the type of reserve that is created from capital profits. The purpose for which a capital reserve is created is for preparing the company for sudden events like inflation, business expansion, funds for a new project. A capital reserve is created from capital profit earned through sales of capital assets such as the sale of fixed assets, profit on the sale of shares. The special property of capital reserve is that these are permanently invested and cannot be used for any other purpose apart from which it is created.

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Popular questions of class 11 Accountancy

Mr. Sunrise started a business for buying and selling of stationery with ₹ 5,00,000 as an initial investment. Of which he paid ₹ 1,00,000 for furniture, ₹ 2,00,000 for buying stationery items. He employed a sales person and clerk. At the end of the month he paid ₹ 5,000 as their salaries. Out of the stationery bought he sold some stationery for ₹ 1,50,000 for cash and some other stationery for ₹ 1,00,000 on credit basis to Mr. Ravi. Subsequently, he bought stationery items of ₹ 1,50,000 from Mr. Peace. In the first week of next month there was a fire accident and he lost ₹ 30,000 worth of stationery. A part of the machinery, which cost ₹ 40,000, was sold for ₹ 45,000.

From the above, answer the following :
1. What is the amount of capital with which Mr. Sunrise started business?
2. What are the fixed assets he bought?
3. What is the value of the goods purchased?
4. Who is the creditor and state the amount payable to him?
5. What are the expenses?
6. What is the gain he earned?
7. What is the loss he incurred?
8. Who is the debtor? What is the amount receivable from him?
9. What is the total amount of expenses and losses incurred?
10. Determine if the following are assets, liabilities, revenues, expenses or none of the these: sales, debtors, creditors, salary to manager, discount to debtors, drawings by the owner.

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(b) Internal users are the ..................... of the business entity.
(c) A ..................... would most likely use an entities financial report to determine whether or not the business entity is eligible for a loan.
(d) The Internet has assisted in decreasing the ..................... in issuing financial reports to users.
(e) ..................... users are groups outside the business entity, who uses the information to make decisions about the business entity.
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What is a journal? Give a specimen of journal showing at least five entries.

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Complete the following work sheet:
(i) If a firm believes that some of its debtors may ′default′, it should act on this by making sure that all possible losses are recorded in the books. This is an example of the ___________ concept.
(ii) The fact that a business is separate and distinguishable from its owner is best exemplified by the ___________ concept.
(iii) Everything a firm owns, it also owns out to somebody. This co-incidence is explained by the ___________ concept.
(iv) The ___________ concept states that if straight line method of depreciation is used in one year, then it should also be used in the next year.
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Question:
Distinguish between ‘revenue reserve’ and ‘capital reserve’.

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Question: Distinguish between ‘revenue reserve’ and ‘capital reserve’.

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Question:
Distinguish between ‘revenue reserve’ and ‘capital reserve’.