Question

Difference between capital reserve and capital redemption reserve

Answer 1

Answer:

The capital reserve is the reserve which is created out of the profits of the company generated from its non-operating activities during a period of time and is retained for the purpose of financing the long term project of the company or write off its capital expenses in future.

Capital redemption reserve account is a type of reserve maintained by a company limited by shares and as the name suggests this reserve deals with shares which are redeemable. The shares which are purported to be redeemed are paid out of the profits of a company.