BF Group, a British company, reported the following components of shareholders’ equity in its 1999 balance sheet (the relative size of each account balance is also shown):

• Called- up share capital (large balance)

• Share premium account (small balance)

• Capital reserve (large balance)

• Profit and loss account (small balance, but much larger than the current year’s net income Required

a. Compare and contrast each of these terms with corresponding terms typically shown on a U.S. firm’s balance sheet.

b. Why do you suppose that a British firm would show both a reserve account and a profit and loss account?