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What's are difference between Capital Reserve & Reserve
Capital ?
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Answer Posted / ca sreedhar
The profits of a company can be devided in to two
categories namely free reserves and capital reserves. Free
reserves are available to shareholders for distribution as
dividend. General Reserve, Profit and Loss account are the
examples for free reserves. Whereas Capital reserves arise
out of some specific transactions like issue of shares at
premium (Securities Premium), Profit on reissue of
forfeited shares, Profit on Revaluation of Fixed Assets,
Sale of part of an org at profit are the examples of
Capital reserve which are not available to shareholders for
the purpose of distribution of dividend. Threfore, Capital
reserves have the nature of capital eventhough they are
profits. Where as, Reserve Capital means that part of un
called share capital which may be reserved for to be called
only at the time of liquidation or winding up of company if
AoA authorises so.
| Is This Answer Correct ? | 27 Yes | 2 No |
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