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Which reserve is crated out of capital gain
- a)General Reserves
- b)Revenue Reserves
- c)Capital Reserves
- d)Specific Reserves
Correct answer is option 'C'. Can you explain this answer?
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Most Upvoted Answer
Which reserve is crated out of capital gaina)General Reservesb)Revenue...
It is made out of capital profit earned due to the sell of fixed assets at a price greater than its cost or profit on the reissue of forfeited shares. So capital reserve is created when there is capital profit i.e profit on sale of assets or upward revaluation of assets.
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Community Answer
Which reserve is crated out of capital gaina)General Reservesb)Revenue...
Capital Reserves are created out of capital gain.
Explanation:
- Capital reserves are created by setting aside a portion of the capital gains earned by a company.
- Capital gains are the profits made from the sale of long-term assets such as property, stocks, or bonds.
- These reserves are not available for distribution as dividends to shareholders and are retained by the company for specific purposes.
- The purpose of creating capital reserves is to strengthen the financial position of the company and provide a cushion for future needs.
- Capital reserves can be used for various purposes, such as funding future expansion projects, repaying debts, or acquiring new assets.
- It is important to note that capital reserves are different from revenue reserves, which are created out of the company's profits from its regular operations.
- Examples of capital reserves include the share premium account, revaluation reserve, and reserve for contingencies.
In conclusion, capital reserves are created out of capital gains and serve as a financial buffer for the company's future needs.
Explanation:
- Capital reserves are created by setting aside a portion of the capital gains earned by a company.
- Capital gains are the profits made from the sale of long-term assets such as property, stocks, or bonds.
- These reserves are not available for distribution as dividends to shareholders and are retained by the company for specific purposes.
- The purpose of creating capital reserves is to strengthen the financial position of the company and provide a cushion for future needs.
- Capital reserves can be used for various purposes, such as funding future expansion projects, repaying debts, or acquiring new assets.
- It is important to note that capital reserves are different from revenue reserves, which are created out of the company's profits from its regular operations.
- Examples of capital reserves include the share premium account, revaluation reserve, and reserve for contingencies.
In conclusion, capital reserves are created out of capital gains and serve as a financial buffer for the company's future needs.
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Which reserve is crated out of capital gaina)General Reservesb)Revenue Reservesc)Capital Reservesd)Specific ReservesCorrect answer is option 'C'. Can you explain this answer?
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