Question

Reserves arising from capital receipts are known as _________.

• A. Capital Reserves
• B. Reserve Fund
• C. Secret Reserve
• D. General Reserve

Answer 1

The correct option is A Capital Reserves

Capital reserves.

Capital Reserves are set aside out of capital profits and are normally not available for distribution as dividend. In other words, reserves created out of capital profits and which are not readily available for distribution of dividend among the shareholders is called Capital Reserves.

Example of capital reserves are Profit prior to incorportion, profit on redemption of debentures, profit on slae of fixed assets, etc.