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Zorluk: OrtaReserves and Capital Structure

Match each company reserve in Column A with its correct definition and statutory characteristic in Column B.

  • Share Premium AccountStatutory capital reserve arising from issuing shares above face value, restricted to specific legal uses such as paying up unissued shares for bonus issues
  • Revaluation ReserveUnrealized capital reserve created when non-current assets are revalued above their net book value
  • General ReserveRevenue reserve set aside out of distributable profits to strengthen the financial position for general future needs
  • Retained EarningsAccumulated revenue reserve comprising profit after tax remaining after appropriations and dividend payments

Cevap

Share Premium Account matches statutory capital reserve arising from issuing shares above par value; Revaluation Reserve matches unrealized capital reserve created from revaluation of non-current assets; General Reserve matches revenue reserve set aside out of distributable profits for general future needs; Retained Earnings matches accumulated revenue reserve comprising profit after tax available for distribution.
Each reserve item is paired according to company accounting rules: Share Premium is a capital reserve restricted by law to specific uses like bonus share issues; Revaluation Reserve represents unrealized gains on non-current assets; General Reserve is a revenue reserve set aside from earned profits for general stability; Retained Earnings represents accumulated undistributed net profits available for dividend declaration.

Adım Adım Çözüm

1
Distinguish between Capital Reserves and Revenue Reserves
Capital reserves (Share Premium, Revaluation Reserve) are created from non-trading sources or statutory restrictions and cannot be distributed as cash dividends. Revenue reserves (General Reserve, Retained Earnings) are created from trading profits and are available for dividends.
Understanding the source and legal restrictions of reserves determines their classification.
2
Identify the specific nature of each Capital Reserve
Share Premium comes from issuing shares above par value and has legally restricted uses. Revaluation Reserve records unrealized gains on asset revaluation.
Share Premium is governed by statutory usage provisions, whereas asset appreciation forms revaluation surplus.
3
Identify the specific nature of each Revenue Reserve
General Reserve is an intentional allocation of profit to bolster financial strength, while Retained Earnings is the unappropriated balance of cumulative net income.
General Reserve requires a specific transfer entry, whereas Retained Earnings carries over accumulated residual profit.

Anahtar Kavram

Classification and characteristics of Capital Reserves versus Revenue Reserves in company accounts
Tahmini Süre:1m 30s
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Konular

Reserves and Capital Structure

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