What is the difference between paid up capital and capital reserve

There are two major differences: ** and use.

Paid-in capital (or share capital) refers to the capital actually invested by the investor in the enterprise and registered in accordance with the law in accordance with the articles of association or contracts and agreements, which reflects the basic property rights relationship between the owner of the enterprise and the enterprise. Capital reserve is the part of the investor's capital contribution that exceeds its share of the registered capital, as well as the gains and losses directly included in the owner's equity, and it does not directly indicate the owner's basic property rights relationship to the enterprise.

2.Judging by the use.

The composition ratio of paid-in capital (or share capital) is the basis for determining the owner's participation in the financial operation decision-making of the enterprise, the basis for the enterprise to distribute profits or dividends, and the basis for determining the owner's claim to net assets when the enterprise is liquidated. The use of capital reserve is mainly used to increase capital (or share capital). The capital reserve does not reflect the proportion of ownership by each owner, nor can it be used as a basis for the owners to participate in the financial and operational decisions of the enterprise or to distribute profits (dividends).

Although there is an essential difference between capital reserve and paid-in capital. However, both paid-in capital and capital reserve are components of the owner's equity of the enterprise, and both belong to the category of invested capital.

1. Capital reserve refers to the part of capital or assets invested by investors or other persons (or units) whose ownership belongs to investors but does not constitute paid-in capital.

From the perspective of the formation of capital reserve, the part of the capital invested by investors that exceeds the statutory registered capital, or the transformation form of assets invested by other people (or units) that do not form paid-in capital, it is not the transformation of net profit from the operation of the enterprise, and in essence, it belongs to the category of invested capital and is enjoyed by the owners of the enterprise.

2. Although capital reserve and paid-in capital belong to the category of invested capital, there is a difference between the two. First of all, the paid-in capital is generally invested by the investor in the enterprise in accordance with the provisions of national laws, regulations and relevant provisions and the agreement, contract, articles of association and other legal documents between the enterprise investors, which is authorized capital, which is consistent with the registered capital of the enterprise.

Therefore, there are relatively strict restrictions on paid-in capital in terms of **, amount, investment method, term, etc.

3. The capital reserve has its own specific capital, mainly in the capital (or share capital) premium, which is the part of the paid-in capital of the enterprise investor that exceeds the face value or registered capital, but it does not appear directly in the name of capital due to the provisions of the law.

4. Paid-in capital is invested by investors under the premise of seeking value appreciation and wealth maximization, and the purpose is to maximize the return on investment; Although capital reserve is also invested by corporate investors for corporate returns, its return benefits are not enjoyed by them alone, and some capital reserves such as:""Businesses accept donations""There is no need to seek a return on investment.

5. Paid-in capital belongs to the original capital investment, which generally remains unchanged in accounting; In addition to the part formed by investors' investment, the capital reserve is the value-added formed by the enterprise in the process of operation for some reason without direct expenditure, and the ultimate reason for this value-added is also the enterprise economy.

For economic purposes, such as donations made by related party shareholders to the enterprise, they are also based on the good value appreciation of the enterprise or for other economic purposes.

The first is to understand their definition :)

Paid-in capital: refers to all kinds of property and materials actually invested by investors in the production and operation activities of enterprises. (You can invest in currency, but you can also invest in materials, such as machinery and equipment.)

According to the classification of enterprise investment, it generally includes state capital, corporate capital, individual capital, and foreign capital, which constitute the capital investment of all owners of the enterprise.

For example, he received 1 million yuan from Li and deposited it in the bank.

Debit: Bank deposit 100

Credit: Paid-up capital 100

For example, foreign investor Zhang invested in a set of machinery and equipment worth 450,000 yuan.

Borrow: fixed assets 45

Credit: Paid-up capital 45

Capital reserve: It is a variety of value-added obtained by the enterprise but not due to the production and operation activities of the enterprise itself, and the common rights and interests of investors due to the appreciation of capital itself or other reasons, including the premium of share capital, the revaluation and appreciation of statutory property, the value of assets accepted for donation, etc.

For example, the enterprise accepts a donation of 100,000 yuan and deposits it in the bank.

Borrow: Bank deposit 10

Credit: Capital Reserve 10

Paid-in capital and capital reserve are owner's equity accounts, with the debit side indicating a decrease and the credit side indicating an increase.

1.The difference between the sale of capital and paid-in capital (or share capital).

1) From the perspective of ** and nature: paid-in capital (or share capital): refers to the capital that the investor actually invests in the enterprise and registers according to the law in accordance with the articles of association or contract and agreement, which reflects the basic property rights relationship of the enterprise owner to the enterprise.

Capital reserve is the part of the investor's capital contribution that exceeds its share of the registered capital, as well as the gains and losses directly included in the owner's equity, and it does not directly indicate the owner's basic property rights relationship to the enterprise.

2) From the perspective of use: paid-in capital (or share capital): the composition ratio of paid-in capital is the basis for determining the owner's participation in the financial operation decision-making of the enterprise, and it is also the basis for the enterprise to distribute profits or dividends, and it is also the basis for determining the owner's claim to net assets when the enterprise is liquidated.

Capital reserve: The purpose of capital reserve is mainly to increase capital (or share capital). Capital reserve does not reflect the proportion of ownership by each owner, nor can it be used as the basis for the owner to participate in the financial operation decision-making of the enterprise or to distribute profits (or dividends).

3.Summary: Paid-in capital refers to the capital actually invested by the investor in the enterprise in accordance with the articles of association or contract and agreement, and it is the total authorized capital registered by the enterprise, which indicates the basic property rights relationship of the owner to the enterprise.

Paid-in capital is the permanent capital of the enterprise**, it is the most basic material basis to ensure the continuous operation of the enterprise and the repayment of debts, and it is the buffer for the enterprise to resist various risks - that is, the investment of the boss. Capital reserve refers to the provident fund formed by an enterprise in the course of operation due to the acceptance of donations, the premium of share capital, and the revaluation and appreciation of statutory property. Retained earnings are the profits created by the company in the course of operation, but are not distributed to the owners and retained in the company due to the needs of the company's business development or due to statutory reasons.

**The net profit realized from the production and operation activities of the enterprise, including the surplus reserve and undistributed profits of the enterprise, is that the boss does not take the profits left in the enterprise.

Legal basis

Article 26 of the Company Law: The registered capital of a limited liability company shall be the amount of capital contribution subscribed by all shareholders registered with the company registration authority. Where laws, administrative regulations and decisions have other provisions on the paid-in registered capital and the minimum amount of registered capital of a limited liability company, such provisions shall prevail.