Company AccountsQ-2 | Introduction to Company AccountsQuestion 4878 of 112
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Detailed Solution & Explanation

Reserve capital:  It is that part of the uncalled capital of the company which can be called up only in the event of winding up.  The company can determine this by passing special resolution (Section 65 of Companies Act, 2013). The company cannot demand the payment of money on the shares to that extent during its lifetime.  When once the reserve capital has been so created, it cannot be charged or mortgaged as security for any loan raised by the company and it cannot be called up.  Creating such reserved capital will not require any accounting entry and the capital will continue to be shown as partly paid up in the balance sheet.  Fact of such reservation should be disclosed in the balance sheet.  The Reserve capital is different from Capital reserve, which is created out of profits.

About This Chapter: Partnership & Companies

Paper

Paper 1: Accounting

Weightage

15-20%

Key Topics

Admission, Retirement, Death, Shares, Debentures

This chapter covers Admission, Retirement, Death, Shares, Debentures and is part of Paper 1: Accounting in the CA Foundation exam.

View Official ICAI Syllabus

Exam Strategy Tip

This topic carries 15-20% weightage. Focus on understanding core concepts rather than memorizing.

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