Question

Reserve created for maintaining a stable rate of dividend is termed as dividend equalisation fund.

• A. True
• B. False

Answer 1

The correct option is A True

This Statement is true.

Dividend Equalization reserve is a distributable reserve which is specifically set up to ensure that dividends remain stable for despite being changes in earnings.Stability in dividend helps in maintaining trust among shareholders. So in the year of higher profit companies transfer some part of profit to this fund and in year of less profit dividend is paid out of this profit.