Differentiate between Reserve Capital and Capital Reserve:
Answers
Capital reserve is a reserve that is made out of capital profits (such as profit on reissue of forfeited shares, sale of fixed assets at a higher price, etc.) and maintained in the Balance Sheet under the head 'Reserves and Surplus' as per the Companies Act, 2013 and to used only for special purposes.
RESERVE CAPITAL:
It is the part of authorized capital that has not yet been called capital and can only be called only at the time of liquidation.
Answer:
Reserve capital: It refers to that portion of increased nominal capital or uncalled share capital which shall not be called up , except in the event of winding up .
It is not necessary to create reserve capital.
A resolution is required to for creation of Reserve capital .
It is not shown in the company's balance sheet.
Capital Reserve : Capital reserve is that reserve which is created out of Capital profits such as profit on sale of fixed assets, profit on revaluation of fixed assets.
It is necessary to create Capital Reserve , in case of capital profits.
No resolution is required for the creation of Capital reserve
It is shown as the first item under the head , 'Reserves and surplus ' on the equity and liabilities side of the balance sheet
Explanation: