Revenue reserve is formed out of the revenue turnover earned in the usual course of the business. It refers to the undistributed revenue earnings. It can be disseminated as dividend to the shareholders. Revenue reserve helps to make stronger the economic situation of the company and also helps to affirm standardized rate of dividend. Revenue Reserve refers to the sum of money retained in business, so as to meet out future contingencies. It refers to the undistributed revenue profit. It is formed for strengthening the economic position, replacing depreciable assets, saving liabilities, declaring uniform rate of dividend and conducting research and progress functions. It is freely accessible for distribution as dividend.
Items relating to revenue reserve
- General reserve
- Dividend equalization fund
- Sinking fund
- Research and development fund