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Which of the following accounts can be transferred to capital redemption reserve account?
- a)General reserve account
- b)Forfeited shares account
- c)Profit prior to incorporation
- d)Share premium account
Correct answer is option 'A'. Can you explain this answer?
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Which of the following accounts can be transferred to capital redempti...
Accounts that can be transferred to capital redemption reserve account:
Therefore, the correct answer is A: General reserve account.
- General reserve account: The general reserve account can be transferred to the capital redemption reserve account. General reserves are created out of the profits of the company and are not specifically designated for any purpose. Therefore, they can be utilized to transfer funds to the capital redemption reserve account.
- Forfeited shares account: Forfeited shares account cannot be transferred to the capital redemption reserve account. Forfeited shares represent shares that have been cancelled due to non-payment or non-compliance with the terms of issue. These funds are typically utilized to compensate the company for the loss incurred due to the non-payment of shares.
- Profit prior to incorporation: Profit prior to incorporation cannot be transferred to the capital redemption reserve account. Profit prior to incorporation refers to the profit earned by the company before it was officially incorporated. Since this profit was earned before the company came into existence, it cannot be transferred to the capital redemption reserve account.
- Share premium account: Share premium account cannot be transferred to the capital redemption reserve account. Share premium is the amount received by a company in excess of the face value of its shares. This amount represents additional capital contributed by the shareholders and is typically utilized for various purposes defined in the company's articles of association.
Therefore, the correct answer is A: General reserve account.
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Which of the following accounts can be transferred to capital redemption reserve account?a)General reserve accountb)Forfeited shares accountc)Profit prior to incorporationd)Share premium accountCorrect answer is option 'A'. Can you explain this answer?
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