In the use of provident fund, it is mainly converted into new capital to make up for the company's losses. In addition, when the company issues new shares, it can use part or all of the common reserve fund to expand funds and issue new shares to shareholders according to the original shareholding ratio. However, the provident fund shall not be distributed to shareholders as dividends.

Capital reserve includes capital (or equity) premium, acceptance of donated assets, capital transfer, foreign currency capital conversion difference, etc. Capital reserve projects mainly include:

(a) the capital (or equity) premium refers to the part of the capital invested by an enterprise investor that exceeds its share in the registered capital;

(2) The preparation for accepting non-cash assets donation refers to the capital reserve increased by the enterprise due to accepting non-cash assets donation;

(3) Accepting cash donations refers to the capital reserve increased by an enterprise due to accepting cash donations;

(4) The preparation for equity investment refers to the capital reserve increased by the investee due to donations and other reasons when the enterprise uses the equity method to calculate the long-term equity investment in the investee, and the capital reserve increased by the enterprise according to the shareholding ratio;

(5) Transferred funds refer to the part that an enterprise transfers to its capital reserve according to regulations after receiving the funds allocated by the state for technological transformation and technical research. The enterprise shall account for the transferred amount;

(6) The difference in foreign currency capital conversion refers to the difference in capital conversion caused by the different exchange rates adopted by enterprises to accept foreign currency investment;

(7) Other capital reserve refers to the capital reserve formed in addition to the above-mentioned capital reserve, and the amount transferred from each reserve item of capital reserve. The debts exempted by creditors are also accounted for in this project.

Capital reserve cannot be converted into share capital (or share capital).