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Shreyas Murali
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This question is probably a duplicate of this

Linked from this discussion is this post, at the end of which it is explained that the available (accessible) memory has been reduced for compatibility for certain softwares (sonic pi)

The current rpi-update kernel does have the full 1G supported (but breaks sonic pi). That will become the "stable" kernel in the future when we have a solution for the sonic pi problem.

So, the full 1G of sdram will be available in the future when we believe it's stable for use uses. If you want it now, then run rpi-update, but be aware that sonic pi (and possibly other apps) may break.

Shreyas Murali
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