Question

Following are shown under the head Reserves and Surpluses.

• A. General reserve
• B. Workmen compensation fund
• C. Investment fluctuation fund
• D. All of the above

Answer 1

The correct option is D All of the above

Reserves are the amounts set aside out of profits. It is an appropriation of profits or accumulated profits to strengthen the financial position of the business. Reserves are not set aside to meet a liability or depreciation in the value of assets but is set aside to meet known or unknown contingency that may arise in future. For e.g., General Reserve, Reserve for Expansion etc.

it is created as a matter of prudence out of profits.

Following are the examples of reserve - General reserve, Workmen compensation fund, investment fluctuation fund, Capital redemption reserve, Debenture redemption reserve, etc.