Tag: reserves

Quizzes (0) Questions (122)

Questions Related to reserves

Multiple choice book keeping and accountancy reserve and fund kinds of reserves secret reserve reserves

Any reserve which is not apparent on the face of the balance sheet is known as _____________.

  1. Secret reserve

  2. Hidden reserve

  3. Inner reserve

  4. Any of these
Reveal answer Fill a bubble to check yourself
D Correct answer
Explanation

"A reserve which is not visible on the balance sheet is called secret reserves."  It is also known as "Hidden reserve" or "Inner reserve".
It is a surplus concealed. In case of a secret reserve existence the actual financial position of the business is better than shown in the balance sheet. In case of bank, insurance companies and financial institutions secret reserves are justified.

Multiple choice book keeping and accountancy reserve and fund kinds of reserves secret reserve reserves

___________ is Created to stabilise or maintain dividend rate.

  1. Dividend Equalisation Reserve

  2. Proposed Dividend

  3. General Dividend

  4. None
Reveal answer Fill a bubble to check yourself
A Correct answer
Explanation

An amount retained from earnings to provide for  distribution of a minimum dividend in subsequent business periods.

Dividend equalisation reserve is a revenue reserve that serves as a buffer between a certain dividend level and profit available. Sums are transferrred to this reserve account in good years, and withdrawn from in poor years to maintain the dividend rate.

Multiple choice book keeping and accountancy reserve and fund kinds of reserves secret reserve reserves

____________ is created to provide for claims of the workers due to accident, etc.

  1. General Reserve

  2. Worksmen Compensation Fund

  3. Investment Fund

  4. None
Reveal answer Fill a bubble to check yourself
B Correct answer
Explanation

Workmen Compensation is a type of insurance policy that safeguards an employee against any injury or death during the job time. The total cost of medical treatment and low wages are covered under Workmen Compensation Insurance Policy, in case the injury is caused during or due to employment. Workmen Compensation Fund is mandatory under the Workmen's Compensation Act, 1923 in India.

Multiple choice book keeping and accountancy reserve and fund kinds of reserves secret reserve reserves

___________ is created to provide funds for redemption of debentures.

  1. Dividend Equalisation Reserve

  2. Debenture Redemption Reserve

  3. Redemption Fund

  4. None
Reveal answer Fill a bubble to check yourself
B Correct answer
Explanation

According to the amendments in Indian Companies Act, 1956 in 2000, it is stated that Indian corporation who issue debentures must maintain a reserve to protect the investors against possible default  by the company. This reserve is  known as debenture redemption reserve. It states that an adequate amount must be transferred from profits every year to this reserve until issued debentures are redeemed. 

Multiple choice book keeping and accountancy reserve and fund kinds of reserves secret reserve reserves

A specific reserve can be created for specific purpose.

  1. True

  2. False
Reveal answer Fill a bubble to check yourself
A Correct answer
Explanation

Specific reserve is that reserve which is created for a specific purpose and can be utilized only for that purpose. For example, Dividend Equalization Reserve is a specific reserve, because it is created to maintain a steady rate of dividend flow. Debenture redemption reserve, Capital redemption reserve, Investment fluctuation reserve etc. are the example of specific reserve.

Multiple choice book keeping and accountancy reserve and fund kinds of reserves secret reserve reserves

__________ may be defined as a sum set aside out of divisible profits ad retained in order to provide for unexpected or unknown contingencies or loss or to equalize dividends or to strengthen the financial condition of the business.

  1. Provisions

  2. Reserve Fund

  3. Fund

  4. Specific Reserve
Reveal answer Fill a bubble to check yourself
B Correct answer
Explanation

A reserve fund is a saving account or other highly liquid asset set aside by an individual or business to meet any future costs or financial obligations, especially those arising unexpectedly. 

Multiple choice book keeping and accountancy reserve and fund kinds of reserves secret reserve reserves

Under sinking fund method of depreciation any surplus in sinking fund A/c is transferred to ____________.

  1. Capital Reserve A/c

  2. General Reserve A/c

  3. Reserve Capital A/c

  4. Profit and loss A/c
Reveal answer Fill a bubble to check yourself
B Correct answer
Explanation

Any surplus in Sinking fund account may be transferred to general reserve account. If any deficit, that may be transferred to profit and loss account. The journal entry for this transaction is:

For Profit:

Sinking fund A/c ------Dr.
   To General reserve A/c

For Deficit:

Profit and loss A/c----- Dr. 
   To Sinking fund A/c

Multiple choice book keeping and accountancy reserve and fund kinds of reserves secret reserve reserves

Under sinking fund method of depreciation any deficit in sinking fund A/c is transferred to ____________.

  1. Capital Reserve A/c

  2. General Reserve A/c

  3. Reserve Capital A/c

  4. Profit and loss A/c
Reveal answer Fill a bubble to check yourself
D Correct answer
Explanation

Any surplus in Sinking fund account may be transferred to general reserve account. If any deficit, that may be transferred to profit and loss account. The journal entry for this transaction is:

For Profit:

Sinking fund A/c ------Dr.
   To General reserve A/c

For Deficit:

Profit and loss A/c----- Dr. 
   To Sinking fund A/c

Multiple choice book keeping and accountancy reserve and fund kinds of reserves secret reserve reserves

Capital Redemption Reserve can be used for _______________.

  1. Issue of fully paid up Bonus Shares

  2. Payment of Dividend

  3. Both (a) and (b)

  4. Writing off losses
Reveal answer Fill a bubble to check yourself
A Correct answer
Explanation

The Capital Redemption Reserve (CRR) is a restricted reserve created under the Companies Act and can only be used for specific purposes, such as issuing fully paid-up bonus shares.

Multiple choice book keeping and accountancy reserve and fund kinds of reserves secret reserve reserves

Which of the following statements is false?

  1. Capital redemption reserve cannot be used for writing off miscellaneous expenses and losses.

  2. Capital profit realised in cash can be used for payment of dividend.

  3. Reserves created by revaluation of fixed assets are not used for issue of bonus shares.

  4. Dividend is payable on the calls paid in advance by shareholders.
Reveal answer Fill a bubble to check yourself
D Correct answer
Explanation

   Option D is the correct one.

Disclosure in Balance Sheet Calls in advance is shown separately, in the Balance Sheet as a liability of the company under the heading 'Current Liabilities' until the calls are made and the amount actually becomes payable by the shareholder. 
A company may pay interest on such amount received in advance at the rate of 12% p.a. No dividend is payable on this amount. It adjusts the amount of calls-in-advance for the payment of calls when they become due. Interest payable on Calls-in- Advance is a liability against the profits of the company.