Question

Assertion (A): Reserve Capital and Capital Reserve are the same.

Reason (R): Reserve Capital is a part of Subscribed Capital which the Company may decide to call at the time of winding up of the Company.

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

Options

• Both (A) and (R) are true, but (R) is not the correct explanation of (A).

• Both (A) and (R) are true and (R) is the correct explanation of (A).

• Both (A) and (R) are false.

• (A) is false, but (R) is true.

Answer 1

(A) is false, but (R) is true.

Explanation:

Assertion (A) is false, Reserve Capital and Capital Reserve are not the same. They are two distinct concepts in company accounts.

Reason (R) is true, Reserve Capital is that part of Subscribed Capital which is called up only at the time of winding up.