Share premium is an example of capital reserve.
Capital reserve is a reserve that is created out of capital profits or receipts. Capital profits are those profits that are not earned from the normal business operations but from activities such as the sale of a capital asset or the issue of shares at a premium.
Share premium is the excess amount that a company receives when it issues shares at a price that is more than the face value of the shares. It is the difference between the issue price and the face value of the shares. This excess amount is not revenue earned from the normal business operations, but a capital receipt.
Share premium is therefore an example of a capital reserve, which is a reserve created out of capital receipts or profits. The purpose of a capital reserve is to provide a cushion against potential losses or to finance future capital expenditure.
In summary, share premium is an example of a capital reserve, which is a reserve created out of capital profits or receipts that are not earned from the normal business operations.