4a (i)  Explain reserves;

(ii)  List two classification of reserves

(b) State three ways in which reserves are utilized.

      (c)  List four examples of reserves.

 

 

observation

Majority of the candidates’ attempted this question and performed well. However, few candidates’ could not answer 4a, 4b and 4c.The expected answer include:
4 (ai)  Reserves -  These are amounts set aside out  of profits by companies which are   not for any specific liability.
(aii) Reserves are classified into capital and revenue.
(b)  Utilization of reserves include:
            -   To issue bonus shares.
            -    To write off fictitious assets.
            -  To write off tangible assets.
            -   To redeem premium on debentures.
            -   To redeem premium on preference shares.

 

 

(c)  Examples of reserves include:
            -   Share premium.
            -   Capital redemption reserve fund.
            -   Sinking fund reserve.
            -   Pre-incorporation profit.
            -   Debenture redemption reserve fund.
            -   Profit from revaluation of fixed assets.
            -   General reserve
            -   Profit from forfeiture of shares.