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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