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Answer Posted / thimmappa poojari
Capital Reserve is the reserve created by the Accumulated
capital surplus (NOT REVENUE SURPLUS) viz: amount available
from appreciation of any capital assets by revaluation to
reflect current market value of such assets. The apprecated
amount is added to Capital reserve so that the same can be
adjusted to when revaluation loss occures (adjustment can
be done for past or future revaluation loss), or can be
utilsed for any investment in capital assets/ capital
expneses. However the same can never be used for any
revenue income / expenses. Even payamnet of dividends to
shareholders can not be adjsuted or can not be paid from
such reserve.
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