| Points | General Reserve | Capital Reserve |
| 1. Meaning | The amount set aside from the profit for general purposes is known as general reserve. | Capital reserve is created out of the capital profit which cannot be used to declare dividend. |
| 2. From which profit? | Every year, general reserve is created out of revenue profits. | Capital reserve is created out of capital profit whenever realised. |
| 3. In the Balance Sheet | General reserve is shown under the heading ‘Reserve and Surplus’. | Capital reserve is shown separately from general reserve under the heading ‘Reserves and Surplus.’ |
| 4. Use | General reserve can be used for any purpose. It can also be used to declare dividend. | Capital reserve can be used to write off capital losses, to give discount on shares and debentures, to write off fictitious assets and to issue bonus shares. It cannot be used to declare dividend. |
| 5. From which account it is appropriated? | General reserve is appropriated out of Profit and Loss Appropriation Account. | Capital reserve arises out of capital profit. The amount of capital profit is transferred to Capital Reserve Account. |
| 6. Limitation of use | Purpose of general reserve is not specific. It means use of General reserve is unlimited. | Purpose of capital reserve is specific. It means use of capital reserve is limited. |
