Assertion (A) When a company earns profit prior to its incorporation, it is called capital profit.
Reason (R) Capital profit cannot be used for distribution as dividend to the shareholders.
A. (A) is true, but (R) is false
B. Both (A) and (R) are false
C. (A) is false, but (R) is true
D. Both (A) and (R) are true
Answer: Option D
Solution (By Examveda Team)
Both (A) and (R) are trueExplanation:
Before incorporation, any profit earned by a company is termed as capital profit. This profit cannot be distributed as dividends to shareholders because dividends can only be distributed from profits earned after incorporation, known as revenue profits.
Therefore, both Assertion (A) and Reason (R) are true, and Reason (R) correctly explains Assertion (A).
This Question Belongs to Commerce >> Accounting
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Comments (1)
Accounting provides information on
A. Cost and income for managers
B. Company's tax liability for a particular year
C. Financial conditions of an institutions
D. All of the above
The long term assets that have no physical existence but are rights that have value is known as
A. Current assets
B. Fixed assets
C. Intangible assets
D. Investments
The assets that can be converted into cash within a short period (i.e. 1 year or less) are known as
A. Current assets
B. Fixed assets
C. Intangible assets
D. Investments
Patents, Copyrights and Trademarks are
A. Current assets
B. Fixed assets
C. Intangible assets
D. Investments
Option D is correct
Both are correct