Question

Which of the following cannot be used for the purpose of creation of capital redemption reserve account?

• A. Profit and Loss Account (credit balance).
• B. General Reserve.
• C. Dividend Equalization Reserve.
• D. Unclaimed Dividends.

Answer 1

The correct option is D Unclaimed Dividends.

To the extent that the preference shares are redeemed out of profits, Capital Redemption Reserve Account must be credited with dividend equalization reserve that are by debiting the profit and loss Account, general reserve or other accounts showing profits otherwise available for distribution of dividends.

So, unclaimed dividends doesn't form part of dividend equalization reserve and cannot form part of capital redemption reserve.