Reserve capital means:a)The part of subscribed uncalled capitalb)Accumulated Profitsc)The Part of Capital Reserved)The part of Capital Redemption ReserveCorrect answer is option 'A'. Can you explain this answer?

Question

Answer

Reserve Capital”shows the part of the authorized capital that has not yet called up by the company and is available for drawing, if necessary. so this is the part of the subscribed uncalled capital which is called up by the company only at the time of liquidation and hence option a is the correct answer

Answer

Reserve capital and capital reserve are two different thing. when company subscribe share, company invoke those amount which is needed and those amount which is not needed is reserve capital and company invoke that amount on dissolution us called reserve capital. and it is uncalled capital on subscribe share.

Answer

Reserve capital refers to the part of subscribed uncalled capital. In other words, it is the portion of a company's authorized share capital that has not yet been called upon by the company for payment. This means that the shareholders have not yet been required to pay the full amount of their subscribed shares.

There are various reasons why a company may choose to keep a portion of its capital as reserve capital. Some of these reasons include:

1. Future funding: By keeping a portion of the capital as reserve, the company ensures that it has access to funds in the future when it may need additional capital for expansion or other purposes.

2. Financial stability: Maintaining reserve capital provides a cushion for the company in times of financial difficulty. It acts as a safety net that can be used to cover any unexpected expenses or losses.

3. Dividend distribution: Reserve capital can also be used to pay dividends to shareholders. If the company has accumulated profits, it may choose to distribute them as dividends from the reserve capital.

4. Capital requirements: Certain industries or jurisdictions may have specific regulations that require companies to maintain a minimum level of reserve capital as a safeguard against potential risks.

It is important to note that reserve capital is different from accumulated profits. Accumulated profits refer to the profits that a company has earned over time and retained within the business, while reserve capital specifically refers to the uncalled portion of the authorized share capital.

In summary, reserve capital is the part of subscribed uncalled capital that a company retains for future use or to meet regulatory requirements. It provides financial stability and flexibility to the company and can be used for various purposes, including future funding, dividend distribution, and meeting capital requirements.

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