27 November 2008
If the company issue the shares at premium, then we need to show the premium amount in liabilities side of the balance sheet but how do we mention it in the balance sheet and with what name?
27 November 2008
Reserve Capital is that part of Issued capital which can be called up only at the time of liquidation.
For Example, If you have Authorised Capital of 50,000 shares, out of which you have issued only 30,000 shares Rs.8 called up with a clause that the remaining Rs. 2 can be called up only at the time of Liquidation. So, this type of reserved capital is called Reserve Capital. Secondly, this capital NEVER forms PART OF BALANCESHEET.
Capital Reserve However, capital reserve is that part of profits which have not accrued from the normal course of business.
For Example When there is restructuring/internal reconstruction or there is purchase of business(amalgamation) then the profit on such adjustment is transfered to Capital Reserve. These reserves FORM part of BALANCESHEET.
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