Dividend equalization reserve is a type of reserve that is created out of profits. It is not created out of assets, charged against profit, or charged against assets.

Here's a detailed explanation:

1. Definition of dividend equalization reserve:
- Dividend equalization reserve is a reserve created by a company to ensure a stable dividend payout to its shareholders, regardless of fluctuations in profits.
- It is a form of retained earnings that is set aside specifically to maintain a consistent dividend payment.

2. Purpose of dividend equalization reserve:
- The main purpose of creating a dividend equalization reserve is to smoothen the dividend payments over time, especially when a company's profits are subject to substantial fluctuations.
- It helps to avoid sudden changes in dividend amounts, providing stability and predictability to shareholders.

3. Creation of dividend equalization reserve:
- Dividend equalization reserve is created out of profits earned by the company.
- When a company makes profits, a portion of those profits is transferred to the dividend equalization reserve.
- This reserve accumulates over time as the company continues to generate profits.

4. Utilization of dividend equalization reserve:
- The dividend equalization reserve is utilized during periods when the company's profits are lower or insufficient to maintain the desired dividend payout.
- In such cases, the reserve is used to supplement the dividend payment, ensuring that shareholders receive a consistent amount.
- This helps to maintain the company's dividend policy and keep shareholders satisfied even during periods of lower profitability.

In conclusion, the correct answer is option 'B' - dividend equalization reserve is created out of profits. It is important for companies to establish this reserve to maintain a stable dividend payout, especially when profits are subject to fluctuations.

B