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Recording Reserves

General Reser...

Question

General Reserve is created with the objective _________.

A

to make available additional working capital

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B

to meet any unknown liability

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C

to equalize rate of dividend

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D

all the three

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Solution

The correct option is D all the three
When any amount is kept separate by a company out of its profit for future purpose then that is called as general reserves. General reserves are prepared not for any specific purpose, It can be used for many purpose such as additional working capital to strengthen the cash resources of the business, to meet unknown liabilities of the business and to equalise the rate of dividend.

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