alleryStart learning →Which is true of capital reserve from a promoters contribution grant?
ACannot be distributed
BIs credited to profit
CIs a deferred income
DIs paid out as dividend
Answer & Solution
Correct answer: A. Cannot be distributed
Such a reserve can be neither distributed as dividend nor treated as deferred income.
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Rs 8 lakh grant on land, no obligations, deferred income method. Capital reserve credit?Rs 2 lakh asset grant, deferred income, 8-year life. Yearly P and L income?Capital reserve of Rs 25 lakh from a promoters grant; Rs 5 lakh refunded. Reserve left?Asset book value Rs 6.4 lakh rises by a Rs 2 lakh grant refund; 8 years remain, SLM. YearlRevenue grant refund Rs 2 lakh; unamortised deferred credit Rs 1.5 lakh. P and L charge?Rs 4 lakh revenue grant offsets training cost incurred evenly over 4 years. Yearly income?Rs 6 lakh land grant carries obligation costs charged evenly over 5 years. Yearly credit?Rs 3 lakh grant, 5-year asset, SLM. Deferred income balance after 2 years?