what is the difference between capital reserve and reserve capital
Answers
Answer:
Reserve Capital:
1. It is that part of capital which is not issued and can be issued only when company goes under liquidation.
2. To Create reserve capital, Is not the necessity of a company.
3. To create reserve capital, a special resolution is required to be passed.
4. It is a part of capital, which is not received.
5. It is not disclosed in the Balance Sheet of Company.
6. It can be called and used only at the time of winding up of the company.
Capital Reserve:
1. It is not earned by company in the normal course of business; rather, it is created out of capital profits by the company.
2. To create capital Reserve is necessary if there is a capital profit.
3. No need of passing any special resolution at the time of creation of capital reserve.
4. It is that part of profit which is earned and received.
5. It is disclosed in Company’s Balance Sheet and is shown in the liabilities side under the head ‘Reserves and Surplus.
Answer:
The profit earned by the company through special transaction, that is not available for distributing dividend to shareholders is known as Capital Reserve. Whereas, The part of uncalled capital, that is called up only on the event of company's liquidation is known as Reserve Capital
Explanation:
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