Multiple choice

Directions: Choose the correct option for the given question.

How is profit prior to incorporation treated as?

  1. Revenue reserve

  2. Secret reserve

  3. Capital reserve

  4. General reserve
Reveal answer Fill a bubble to check yourself
C Correct answer
Explanation

Profit earned prior to incorporation represents pre-incorporation earnings that legally belong to the company as it existed upon formation. Such profits are treated as capital reserve, not revenue reserve, because they arise from a period before the company's legal existence. Revenue reserves are created from post-incorporation trading profits distributable as dividends.

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