What does Capital Reserve mean?

Capital reserve refers to the asset value invested by investors, but cannot be included in the paid-in capital, or the funds obtained from other ** and enjoyed by investors.

The contents of capital reserve mainly include capital premium or equity premium, donated assets, equity investment provisions, appropriation transfers, foreign currency capital translation differences and other capital reserves.

The purpose of capital reserve is to transfer capital.

In short, capital reserve is not converted from the profits realized by the enterprise, but from the category of invested capital; Its main purpose is to increase capital.

For example, when **** is founded, the capital contribution subscribed by the investor is often consistent with the registered capital and will not generate capital reserve. When a new investor enters the community, the amount of capital invested is equal to the amount of capital contributed in proportion to the investment, which is included in the paid-in capital, and the excess part is the capital reserve.

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Capital reserves refer to the provident fund formed by an enterprise in the course of operation due to the acceptance of donations, equity premiums, and the revaluation and appreciation of statutory property. Capital reserve is a credit that is not related to the earnings of a business but is related to capital. Capital reserve refers to the capital invested by investors or others in the enterprise, the ownership of which belongs to the investor, and the amount invested exceeds the authorized capital.

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It is the capital or assets invested by the investor or others in the enterprise, the ownership belongs to the investor, and the amount exceeds the authorized capital. Generally, it includes: capital (or equity) premium, revaluation and appreciation of legal property, difference in translation of foreign currency capital, value of assets received as donated, etc.

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The popular explanation of capital reserve is as follows:

Simply understood, it actually refers to the provident fund directly formed by capital reasons, such as the provident fund formed by the enterprise in the course of operation due to the issuance premium, the transfer of special appropriations, the acceptance of donations, the capital (share capital) premium and the revaluation and appreciation of statutory property.

The use of capital reserves.

1. From the perspective of capital reserve, it is not converted from the profits realized by the enterprise, and essentially belongs to the category of invested capital. The main purpose of capital reserve is to increase capital, and there are eight detailed accounts, of which 3 cannot be directly converted into capital.

2. When the company is founded, the capital contribution subscribed by the investor is often consistent with the registered capital and will not generate capital reserve. When a new investor enters the community, the amount of capital invested equal to the proportion of investment is included in the paid-in capital, and the excess part is included in the capital reserve - capital premium. This is different from the capital reserve in long-term equity investment, which is the equity investment provision.

3. The capital invested by the enterprise in the form of non-cash assets from the investor shall be included in the capital reserve according to the value of the assets confirmed by the parties to the investment as the paid-in capital after going through the formalities for the transfer of property rights, and the part of the recognized asset value exceeding its share of the registered capital shall be included in the capital reserve.

4. When the joint-stock company issues shares at a premium, it is necessary to confirm the capital reserve - the premium of the share capital. The balance of the issuance expenses such as handling fees or commissions paid by the issuance ** after deducting the interest income generated by the bureau during the freezing period of the issuance period, and the part of the part where there is no premium or the premium amount is insufficient to cover the issuance expenses shall be directly included in the financial expenses and shall not be regarded as long-term amortization expenses.

Capital reserve: refers to the provident fund formed by the enterprise in the course of operation due to the acceptance of donations, share capital premium, and the revaluation and appreciation of statutory property.

There are four credits that can be included in capital reserve as stipulated in accounting standards: capital (equity) premium, other capital reserve, asset appraisal appreciation, and capital conversion difference.

The first type is the capital reserve that can be directly used to increase capital, which includes capital (or equity) premium, cash donations, appropriation transfers, foreign currency capital translation differences, and other capital reserves. In its elimination, the capital (or share capital) premium refers to the part of the capital invested by the enterprise investor that exceeds its share in the registered capital, which is called the share capital premium in the shares; Acceptance of cash donations refers to the increase in capital reserve of an enterprise due to the acceptance of cash donations; The transfer of appropriation refers to the part of the capital reserve transferred to the capital reserve according to the provisions after the completion of the special spine allocated by the state for technological transformation and technical research, and the enterprise shall be recorded according to the amount transferred;

The first type is the capital reserve that cannot be directly used to increase capital, which includes the provision for non-cash assets and equity investment for donations. Among them, the provision for non-cash assets for accepting donations refers to the increase in capital reserve of enterprises due to the acceptance of donations of non-cash assets; Equity investment provision refers to the increase in capital reserve of the investment enterprise based on the proportion of shareholding or investment when the long-term equity investment of the investee is accounted for by the equity method, due to the acceptance of donations and other reasons by the investee.

Capital reserve essentially belongs to the category of invested capital, and the generation of capital reserve has been caused by the adoption of the registered capital system in China. According to the Company Law and other laws, the purpose of capital reserve is mainly to increase capital, that is, to increase paid-in capital (or share capital). Although the conversion of capital reserve into capital does not lead to an increase in the total owner's equity, the conversion of capital reserve into capital can change the capital structure of the enterprise on the one hand, reflecting the potential for the steady and sustainable development of the enterprise. On the other hand, for shares, it will increase the shares held by investors, thereby increasing the liquidity of the company, thereby activating the stock price and improving the trading volume and capital liquidity.