Difference between Reserve Capital and Capital Reserve
Basis |
Reserve capital |
Capital reserve |
1. Meaning |
Reserve Capital It is that part of the uncalled capital which cannot be called-up except in the event of winding up. |
Capital Reserve It is that part of the reserves which is not free for distribution as dividend . |
2. Optional/ |
It is not mandatory to have reserve capital. |
It is appropriate to transfer capital profits to capital reserve. |
3. Writing off Capital Losses |
It cannot be used to write off capital losses. |
It can be used to write off capital losses . |
4. Resolution |
Special resolution is required for reserve capital. |
No resolution is required for capital reserve. |
5. Disclosure |
It is not disclosed, i.e., shown in the company’s Balance Sheet |
It is disclosed, i.e., shown in the Note to Accounts on Shareholders’ Funds under the head ‘Reserves and Surplus’. |
6. Creation |
It is an uncalled capital. |
It is a reserve set aside out of capital profits. |