15 Capital and reserves
‘I love the creativity. I love the ability to create a capital structure that is appropriate for a company, no matter what field it happens to be in.’
Henry Kravis, US businessman and co-founder KKR & Co.
In a nutshell
Capital and reserves are found in the balance sheet. They represent the owners’ investment in a business. Together, capital and reserves are known as the owners’ ‘equity’ in the business.
(Share) capital is the nominal (face) value of the shares issued to shareholders.
There are two categories of reserves:
- 1Revenue reserves – reflect retained profits, i.e. profits which have not been distributed to shareholders as dividends
- 2Capital reserves – reflect reserves created through non-operating activities. ...
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