Meaning of Reserve Capital

Sir please explain meaning and concept of reserve capital in detail.

asked Sep 11, 2016 in Company Accounts-Accounting for Share Capital by abhi (4 points) 2,779 views

1 Answer

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It is that part of the subscribed capital of a company which the company decides not to call except in case of winding up of the company.  This can be done by passing a Special Resolution at the Annual General Meeting of the company.  For example a company has subscribed capital of Rs.100000 (10000 shares of Rs.10 each).  On these shares it has called up Rs.8 per share.  The company decides not to call the uncalled amount of Rs.2 on its 10000 shares.  Now Rs.20000 (10000xRs.2) will be called Reserve Capital.  This amount can be called up only at the time of winding up of the company.  Unlimited companies must have Reserve Capital.

answered Sep 15, 2016 by jbsclasses (3,971 points)