Question

Features of reserves are:

• A. It is created out of divisible profits
• B. They are available for distribution as dividends
• C. Their creation is voluntary
• D. All of the above

Answer 1

Answer:

D. All of the above

Reserves are created out of profits after tax (divisible profits). ✅ They strengthen the financial position of the firm and can be used for dividend distribution if needed. ✅ Their creation is voluntary; they are not legally mandatory, unlike provisions.