Difference between Reserve Capital and Capital Reserve Class 12
Looking for what is the difference between Reserve Capital and Capital Reserve as per the syllabus of class 12 CBSE, ISC, and state Board.
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Reserve capital Vs Capital Reserve
following are the distinction between Reserve capital and Capital Reserve
| S.N | Basis of Distinction | Reserve Capital | Capital Reserve |
| 1. | Meaning and Creation | 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. | Capital Reserve is that reserve that is created out of capital profits such as profit on the sale of fixed assets, profit on revaluation of fixed assets, the premium on issue of shares and debentures, profit on redemption of debentures, etc. These profits are not earned in the normal course of business. |
| 2. | Necessity | It is not necessary to create reserve capital | It is necessary to create a capital reserve, in case of capital profits. |
| 3. | Realized or not realized | It refers to the amount which has not been received. | It refers to the amount which has already been received. |
| 4. | Disclosure in Balance Sheet | It is not shown in the company’s balance sheet. | It is shown as the first item under the head, ‘Reserves and Surplus’ on the equity and liabilities side of the balance sheet. |
| 5. | Resolution | A resolution is required for its creation. | No resolution is required for the creation of capital reserves. |
| 6. | Time when it can be used. | It can be used only at the time of winding up of the company | It can be used to write off capital losses or to declare a share bonus any time during the life of the company. |
