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    Question

    When a company purchases its own shares out of free

    reserves; a sum equal to nominal value of shares so purchased shall be transferred to
    A Revenue redemption reserve Correct Answer Incorrect Answer
    B Capital redemption reserve Correct Answer Incorrect Answer
    C Buy-back reserve Correct Answer Incorrect Answer
    D Special reserve Correct Answer Incorrect Answer
    E General reserve Correct Answer Incorrect Answer

    Solution

    When a company purchases its own shares out of free reserves, a sum equal to the nominal value of the shares so purchased is transferred to the Capital Redemption Reserve. It ensures that the company maintains a proper capital structure and complies with regulatory requirements.

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