what is capital reserve with example?
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Capital Reserve is an account on the balance sheet to prepare the company for any unforeseen event like infation instability need to expand the business to get into a new and urgent project as an example we can talk about profit on the sale of fixed assets to profit on sale of shares etc.
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Explanation:
Capital reserves are those reserves which are created out of Capital profits. Capital profits are those profits which are not earned in the normal course of the business. These reserves cannot be utilised for the distribution of dividends .
Examples : Profit on sale of fixed assets.
Profit on revaluation of fixed assets .
Profit on redemption of debentures.
Profit on issue of shares and debentures .
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