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What is a difference between capital …

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What is a difference between capital reserve and reserve capital ??

Posted by Akshit Jain 3 years, 10 months ago

CBSE > Class 12 > Accountancy

1 answers

Sia ? 3 years, 10 months ago

Key Difference Between Capital Reserve and Reserve Capital

A portion of profit set aside that can be used for specific purposes only is known as Capital Reserve. Reserve Capital is that form of uncalled share capital that can be called up by the company only in the event of the liquidation of the company.
Capital Reserve the result of accumulating capital profit, whereas Reserve Capital is created out of authorized capital.
On the equity & liabilities side of the Balance Sheet, Capital Reserve appears under the head Reserves & Surplus. Unlike Reserve Capital, which is not disclosed at all.
There is a compulsion in the creation of capital reserve by every company which is not in the case of reserve capital.
For the creation of reserve capital, the special resolution should be passed by the company at Annual General Meeting (AGM).
Capital Reserve has various uses like writing off fictitious assets, or capital losses, etc. but Reserve Capital is used only when the company goes into liquidation.

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