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difference between Reserve capital and capital reserve
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Answer Posted / geethamruth
As per Companies Act 1956,
1.Reserve capital refers to that part of share capital which can be called only at the time of winding up of the company.this is created in-order to provide greater security to the outside creditors against the risk of non-availability of cash to them for satisfaction of their claims.
2.On the other hand Capital reserve means profits which cannot be distributed as dividend because they arised on capital items.Ex:balance in share forfeiture account after setting off discount on reissue of shares when all shares forfeited are reissued
NOTE:AS PER COMPANIES ACT 1956,CAPITAL PROFITS RECEIVED IN CASH CAN BE DISTRIBUTED AS DIVIDEND
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