Multiple choice

Directions: Choose the correct option for the given question.What is Capital Redemption Reserve Account available for ?

  1. Redemption of redeemable preference shares

  2. Redemption of redeemable debentures

  3. Reorganization of share capital

  4. Issue of fully paid bonus shares
Reveal answer Fill a bubble to check yourself
D Correct answer
Explanation

Capital Redemption Reserve is created when a company redeems shares out of profits. This reserve can only be used for issuing fully paid bonus shares to shareholders, not for redemption of shares or debentures. This provision under the Companies Act protects capital and ensures shareholders receive benefits from the company's earnings used for redemption.

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