AbhishekBatabyalHelpful In: 1. Financial Accounting > Miscellaneous What is effective capital? What is effective capital? Share Facebook You must login to add an answer. Username or email* Password* Captcha* Remember Me! Forgot Password? Need An Account, Sign Up Here 1 Answer Voted Recent Ayushi Curious Pursuing CA 2021-11-30T19:50:17+00:00Added an answer on November 30, 2021 at 7:50 pm This answer was edited. Effective Capital is an amount calculated for purpose of arriving at the maximum limit of managerial remuneration as per the Companies Act, 2013 where profit is inadequate or no profit. Other than that it has no use. Computation of effective capital is given in Explanation I to Schedule II of the Companies Act. Schedule II deals with remuneration payable to managers in case of no profit or inadequate profit in the following manner: Computation of effective capital is done in the following manner: Numerical example: ABC Ltd reports its balance sheet as given below: We will compute its effective capital for both an investment company and a non-investment company. 0 Share Share Share on Facebook Share on Twitter Share on LinkedIn Share on WhatsApp Related Questions What are some examples of deferred revenue expenses? Are brands intangible assets? What comes in debit side of Realisation account? What is recorded in the Realisation account? What is not included in Realisation account? What is recorded on the credit side of a Realisation account? Can accounts payable have a debit balance?