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In capital reduction, what happens to revaluation surplus shown in the balance sheet?
ARevaluation reserve is generally NOT used for capital reduction adjustments — it represents unrealised gains
BIt is utilised for capital reduction
CIt is transferred to CRR
DIt is distributed as dividend
Answer & Solution
Correct answer: A. Revaluation reserve is generally NOT used for capital reduction adjustments — it represents unrealised gains
1. Step 1: Revaluation Reserve represents unrealised gains and is not freely available for adjustments like capital reduction or buy-back.
2. Step 2: Per Ch 12/14, only realised reserves (free reserves) and Securities Premium can be used.
3. Step 3: Hence (B).
_Source: ICAI BoS CA Inter Paper 1, Ch 14 "Internal Reconstruction"_