Capital reserve

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rahul

rahul (Querist)
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20 December 2014 what is a capital reserve

Amol S Joglekar

Amol S Joglekar (Expert)
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20 December 2014 A typical case of CAPITAL reseve may arise when in a case of purchase of a company, the consideration paid is less than its ASSET value.
Say ASSET value of 10 is bought for 8....what is this difference of 2... Capital Reserve.

CS Mitesh Mehta

CS Mitesh Mehta (Expert)
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20 December 2014 Capital reserve is created out of capital profit, which does not arise from the normal business activities and are not available for distribution as dividend. It can be utilised for specific purpose as provided in law.

The main sources of these reserves are following:-

1.profit earned prior to incorporation
2.Premium on the issue of shares and debentures.
3.Profit on reissue of forfeited shares
4. Profit set aside for the purpose of redemption of preference shares.
5. Profit on sale of undertaking or part of it.
6. Surplus on revaluation of assets and liabilities.

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