Question

Assertion (A): Reserve Capital and Capital Reserve are synonymous terms, i.e., they mean the same.

Reason (R): Reserve Capital is the capital which the company resolves to call on its winding up. Capital Reserve is a reserve to which capital profits are transferred.

In the context of above two statements, which of the below options is correct?

Options

• Assertion (A) and Reason (R) are correct but Reason (R) is not the correct explanation of Assertion (A).

• Assertion (A) and Reason (R) are correct and Reason (R) is the correct explanation of Assertion (A).

• Assertion (A) is false but Reason (R) is true.

• Both Assertion (A) and Reason (R) are false.

Answer 1

Assertion (A) is false but Reason (R) is true.

Explanation:

Reserve Capital and Capital Reserve are different. Reserve Capital is uncalled capital reserved for winding up, whereas Capital Reserve arises mainly from capital profits.