Reserve Capital
Options
A
B
C
D
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Company AccountsQ-2 | Introduction to Company AccountsQuestion 5211 of 112
All Questions Correct Answer
✅ Option — Correct Option
All Options:
- A
- B
- C
- D
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.
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