Glossary
Revenue reserve
Profit a company keeps that could still be paid out as a dividend later.
What it means
A reserve created from distributable trading profit, such as retained earnings or a general reserve, available for dividends.
Example
Retained earnings and a general reserve are revenue reserves.
Why it matters
It marks profit that is free to distribute, unlike a capital reserve, which is not.
In practice
A revenue reserve appears in the capital and reserves (equity) section of a company's statement of financial position. It shows profits the company has chosen to keep rather than pay out. Retained earnings and a general reserve are typical examples. They are created by transferring amounts out of the profit for the year. Because they come from ordinary trading profit, they remain distributable. A company could later use them to pay a dividend.
If a company makes RM50,000 profit, pays RM20,000 in dividends and transfers RM10,000 to a general reserve, the remaining RM20,000 is added to retained earnings. All of it stays available for future dividends.
The key contrast is with a capital reserve, such as share premium. A capital reserve comes from non-trading events and cannot be paid out as a cash dividend. Both sit in the equity section and both belong to the shareholders. Only a revenue reserve can later be returned to them as dividends.
If reserves in company accounts still confuse you, one of our teachers can sort them into capital and revenue with you, using a simple statement. Book a trial class.
Related terms
Definitions here are general accounting explanations for study. For your board's exact wording, see its official syllabus via Sources.
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