Which of the following is not an example of capital reserve?

Assessment: WAEC SSCE - Financial Accounting - 2011 (Objective) Subject: Financial Accounting

Question 1 Report

Which of the following is not an example of capital reserve?
Answer Details
Pre-incorporation profits is not an example of capital reserve. Capital reserves are reserves created from the capital profits of a company, and are not distributable as dividends. Share premium, retained profits and surplus on revaluation of assets are all examples of capital reserves. Pre-incorporation profits, on the other hand, are the profits earned by a company before it was incorporated and are therefore not considered a capital reserve.
Read lesson note on Provisions And Reserves (WAEC)
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