waecE-LEARNING
Financial Accounting May/June 2012  
Questions: 1 2 3 4 5 6 7 8 9 Main
General Comments
Strength
Weakness/Remedies





question 4
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.

 

 

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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.


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