Multiple choice

Reserves and surplus are

  1. borrowing of the firm

  2. profits which have been retained in the firm

  3. financial securities owned by the firm

  4. amount due to the firm
Reveal answer Fill a bubble to check yourself
B Correct answer
Explanation

Reserves and surplus represent the portion of earnings that a company has retained rather than distributing as dividends to shareholders. These are part of the shareholders' equity section on the balance sheet.

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