Difference between Reserve Capital and Capital Reserve

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/
Mandatory

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.

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