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Issued at Premium and Redeemed at Par

Which of the ...

Question

Which of the following is a revenue reserve?

A

Capital Reserve

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B

Capital Redemption Reserve

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C

Security Premium Account

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D

Debenture Redemption Reserve

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Solution

The correct option is C Security Premium Account
Capital profits are source of capital reserves and the revenue profits constitutes revenue reserves. Capital reserves are used to set off the capital losses but revenue reserves are used to strengthen the financial position, distribute dividend, replace fixed assets and pay off the liabilities.

Share premium account is a revenue reserve and can be utilized to distribute dividend.

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