Meaning and characteristics of reserves - class-XI

This Statement is true. 

Option B is the correct one.
Reserve accounting. A reserve is profits that have been appropriated for a particular purpose. Reserves are sometimes set up to purchase fixed assets, pay an expected legal settlement, pay bonuses, pay off debt, pay for repairs and maintenance, and so forth.The board of directors is authorized to create a reserve.

The stock reserve is calculated on the unsold goods (100 bags) at the difference between invoice price (450) and cost price (400). Reserve = 100 bags * (450 - 400) = 5000.

For the purpose of accounting for amalgamation, we are essentially guided by AS-14 'Accounting for Amalgamations'. Para (3)g of AS 14 deines the term purchase consideration as "the aggregate of the shares and other securities issued and the payments made in the form of cash or other assets by the transferee companyto the sharegolders of the transferor company." in simple words it is the price apyable by the transferee company to the transferor companyfor taking overt the buiness of the transferor company.

Under Section 17, every banking company incorporated in India is required to transfer at least 25% of its current profit to its reserve fund. It is known as statutory reserve. Only those banks get exemptions from this legal condition whose reserve along with share premium if any become equal to paid up capital.

For the purpose of accounting for amalgamation, we are essentially guided by AS-14 'Accounting for Amalgamations'. Para (3)g of AS 14 defines the term purchase consideration as "the aggregate of the shares and other securities issued and the payments made in the form of cash or other assets by the transferee company to the shareholders of the transferor company." in simple words it is the price payable by the transferee company to the transferor company for taking over the business of the transferor company.

When investment in own debenture is cancelled the profit on cancellation is credited to - Debenture Redumption Reserve Account.Because working capital of tge company is adversely affected, it is desirable that the amount equal to the nominal value of the debenture cancelled should be transferred to the debenture redemption reserve a/c out of the profit of the company.

Section 69 : Companies Act 2013

There is an unexpired liability under various policies which may occur during the remaining term of the policy beyond the year and therefore, a provision for unexpired risks is made at normally 50% in case of Fire Insurance and 100% of in case of Marine Insurance. 

Reserves are appropriations against profits, they are created from profits for future applications. Net profit at the end of the year is transferred in specific proportions to Reserves keeping a side this parts of profits.

Revenue profit means Profit earned in normal course of business and reserve created out of this undistributed profits are called revenue reserves.

The capital reserve is the reserve which is created out of the profits of the company generated from its non-operating activities during a period of time and is retained for the purpose of financing the long term project of the company or write off its capital expenses in future.

Reserves are created to strengthen the business organisation, for contingencies and liquidity. As per accounting principles assets can only be appreciated under re-constitutional conditions.

Reserves are appropriations against profits , they are created from profits for future applications, securities premium is collected when share are issued over its face value hence its not a reserve.

Reduces.

Provisions  are created for anticipated losses or towards the expenses which are due and payable. 

Reserves are the amounts set aside out of profits. It is an appropriation of profits or accumulated profits to strengthen the financial position of the business. Reserves are not set aside to meet a liability or depreciation in the value of assets but is set aside to meet known or unknown contingency that may arise in future. For e.g., General Reserve, Reserve for Expansion etc.

Revenue reserves are those reserves which are created out of profits available for distribution by way of dividend. Revenue reserve refers to the amount which are free for distribution by way of dividend.

Revenue reserves are those reserves which are created out of profits available for distribution by way of dividend. Revenue reserve refers to the amount which are free for distribution by way of dividend. Revenue reserves are also nown as free reserves as they can be freely distributed.

Capital Reserve is the part of the profit or surplus, maintained as an account in the Balance Sheet that can be used only for special purposes. It is made out of capital profits earned due to the sale of fixed assets at a price greater than its cost or profit on the reissue of forfeited shares. So Capital reserve is created when there is capital profit i.e. profit on sale of assets or upward revaluation of assets. 

Capital reserves.

Capital reserves are those reserves which are not created out of operating profits and whicha re not free for distribution by way of profit. 

They are the portion of profits set aside to strengthen the financial position of a business. Generally, reserves are created to meet unknown future obligations which may arise due to miscellaneous business reasons.

This statement is false. Capital Redemption reserve is created to redeem fully paid preference shares. When the company proposes to redeem the preference shares out of the profits, it transfers an amount equal to the nominal value of redeemable preference shares to the capital redemption reserve. 

Bonus shares are additional shares given to the current shareholders without any additional cost, based upon the number of shares that a shareholder owns. These are company's accumulated earnings which are not given out in the form of dividends, but are converted into free shares.

As per the provision of sub section (2) of section 205 of the companies act, no dividend can be declared or paid by the company to its shareholders out of the profits of the company for the financial year after providing depreciation until a specified percentage of profit of the financial year is transferred to reserves.