Question
In the context of company finances, there is a specific
portion of the company's capital that is reserved and can only be called up under particular circumstances, specifically during the liquidation of the company. This portion is not utilized in the company's regular financial operations and does not appear on the balance sheet under normal conditions. Which term accurately describes this portion of the capital that is set aside for such special use during the winding up of the company?Solution
Reserve capital refers to the portion of the authorized capital that a company can call up only in the event of liquidation. This is a reserve fund that is kept aside and is not included in the company's balance sheet under normal circumstances.
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