Read the below given details for learning about Reserve Capital, Subscribed Capital and Authorized Capital.
A company may determine by a special resolution that nay portion of its share capital which has not been already called up shall not be capable of being called-up except in the event of winding up of the company. Such type of share capital is known as reserve capital.
Such type of capital cannot be converted into ordinary capital without the permission of the court and it cannot be dealt with by the directors in any other way. The creation of reserve capital is helpful to creditors because this is the amount which can be made available to them in case of need of distribution in the vent of company’s winding up. No accounting entries are required for the creation of reserve capital. Only a note regarding reserve capital may be given in the Balance sheet.
That part of the issued capital for which applications are received from the public is called the subscribed capital.
Nominal or Registered or Authorized Capital
The amount of capital with which the company intends to be registered is called registered capital. It is the maximum amount which the company is authorized to raise by way of public subscription. There is no legal limit on the extent of the amount of authorized capital.