Answers » Categories » Accounting

What is the difference between capital reserve and capital profit?

1 Answer

Capital profit means a profit that is earned on the sale of a fixed asset or profit earned on raising capital for the business by issuing shares at premium. It is not earned in the ordinary trade of the business. Therefore it is not allowed to transfer this kind of profit to profit and loss account. It can only be credited to capital reserve account, or transferred to the capital account of the proprietor.

Capital reserve account belongs to the liability side of the balance sheet. It is a resource created by the accumulated capital surplus.

Answer this question

by Anonymous - Already have an account? Login now!
Your Name:  

Your Answer:  
Source(s): (optional)

Enter the text you see in the image below
What do you see?
Can't read the image? View a new one.
Your answer will appear after being approved.

Ask your own question