Which of the following is the capital reserve of a company
-
Share premium
- Retained profit
- Accumulated depreciation
- Loss on forfeited shares
The correct answer is: A
Explanation
A capital reserve is an account in the equity section of the balance sheet that can be used for contingencies or to offset capital losses. It is derived from the accumulated capital surplus of a company, created out of capital profit.
Capital Reserve is a type of profit that is earned on capital transactions - an example would be the profit arising from the forfeiture of shares, share premium, Capital Redemption Reserve or Debenture Redemption Reserve.