Question

4. (a)(i) Explain reserves. [3 marks] (ii) List two classifications of reserves. [2 marks] (b) State three ways in which reserves are utilized. [6 marks] (c) List four examples of reserves. [4 marks]

Accepted Answer

(a)(i) Reserves can be defined as fund set aside for no special purposes. It is part of net profit not shared as dividends to shareholders.
(ii) Classification of reserves: I. Capital reserves. II. Revenue reserves.

(b) Ways in which reserves are utilized: I. For bonus shares issued to shareholder. II. For paying premium on debentures and preference shares. III. To reduce debenture and preference shares.

(c) Examples of reserves: (i) Share premium. (ii) Pre-incorporation profit. (iii) Profit from revaluation of assets.

WAEC Accounting 2012 Theory — Question 4

Sign up free to unlock