13 May 2015
DEFINITION of 'Capital Reserve' A type of account on a municipality's or company's balance sheet that is reserved for long-term capital investment projects or any other large and anticipated expense(s) that will be incurred in the future. This type of reserve fund is set aside to ensure that the company or municipality has adequate funding to at least partially finance the project.
INVESTOPEDIA EXPLAINS 'Capital Reserve' Contributions to the capital reserve account can be made from government subsidies, donated funds, or can be set aside from the firm's or municipality's regular revenue-generating operations. Once recorded on the reporting entity's balance sheet, these funds are only to be spent on the capital expenditure projects for which they were initially intended, excluding any unforeseen circumstances.
13 May 2015
1. Capital reserve is created out of capital profits (profit due to reevaluation of assets) and therefore it is not available for distribution as dividend to the shareholders, while reserve capital is that part of authorized capital of a company which is not called up by the company. 2.Reserve capital can be used by the company only in case of liquidation of the company while capital reserve can be used by company at any time for purchasing long term assets by the company. 3.Capital reserve is shown on the liabilities side of the balance sheet while Reserve capital is not disclosed in the balance sheet of the company. 4. Capital reserve can be used by the company to write off capital losses which arises due to selling of assets at lower prices than the book value of that asset while Reserve capital cannot be used for that purpose.
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