share premium and capital reserve

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What is difference between share premium account and capital reserve in terms of utilisation of fund.

Replies (1)

share premium accont is used in case of redeeming pref shares or debenture at premium

when u redeem pref share at premium 

pref share capital-----dr

premium on redemption-----dr

to p.share holders

 

 

then with the share premium account you cancel the debit premium on redemption i.e u take the money of the premium on redemption from the share premium account

 

journal

share premium---dr(kiuki premium less kar rahe hai)

to premium on redemption (kiuki iske jo debit balance tha usko cancel karne ke lie credit kie)

 

 

 

on other hand capital reserve is not so specific  it can be used as free reserve


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