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The reserve that is created from the capital profits is called as Capital Reserve, these are profits that is obtained from activities that are different than the normal business activities. Examples of such activities are: profit obtained from reissuing of debentures, premium on issue of share and debenture, profit redemption on debenture, profits obtained from sale of fixed asset etc. These can be used to issue bonus shares but cannot be used for paying dividend. The capital reserve is used to meet future capital losses.