Question

14. Give two reasons when a parent company need not present consolidated financial statements and is granted exemption by FASB: ----- Part C: Reserves & Provisions 15. Reserves are classified as capital and revenue. How are capital reserves created? 16. Give 3 examples of capital reserves. --.. 17. How are revenue reserves created? 18. What is the financial statement in which these reserves are reflected? ... ***********-------------- ---.. 19. What are revenue reserves used for? ...... .................................................................. 20. What are specific reserves? ---------- 21. Give 2 examples of specific reserves. ---- 22. Why are provisions created? -... 23. How is it shown in the income statement? ----- 24. How is it shown in the balance sheet? -- 25. Give 3 examples of provisions: --------- 26. Which one can be used to distribute dividends to shareholders? Reserves / Provisions

Answer 1

14) Reasons when a palen parent company need not present consolidated financial statements. (il Tempeaoay control: intention was to dispose If the management off the subsidary with in 12 months of its acaruisition to the buyer was actively sought, the subsidasy was not consolidated in the financial statements of parent (17) If the operation of subsidany was under severe long team sestrictions that led to difficulties in transferring funds (ie dividends) from Subsidaly to parent, then subsidary could be excluded from scope of consolidation 15) And How was capital reserve created ? capital dreseaves are created through transactions of capital nature such as selling fixed assets, upward devaluation of assets to reflect their curment market value, issuing shares at premium , porofits on redemption of debentures etc.

se 16) Give 3 examples of capital sie seeves? - Capital redemption reserve Febentude decaphion-wede » Revaluation reserve > profit on sale of fixed assek a porofit on issue of shares / debenture, 17) how are revenue reserves created? Revenue ereserve refers to the past of profit get aside Ee not distributed to shareholders as dividend but kept aside to meet soort wat unforeseen future expenses It is created from revenue profits, which is result of operationg achivities : 18) what is the financial statement in which these reserves are reflected! Ans; These are reflected in share holders funds section of Balance sheet (statement of financial position 19) what are revenue reserver used for? Ans) It can be used for following purposs - dividend to share holders - Expansion of business → stabilizing the dividend rate

20) what are specific reserves? Revenue reserves General reserve Specу Sreserve speafic reseave is the resore which can be utilized for the defined purpose only, Ex: debenture redemption seese tve I workmen compensation fund Dividend cauilization reserve 21) Examples of specific reserve (i) debenture redemption reserve riil dividend equilization reseane 2a) why are provisions And) provisions are an to cover a probable reduction in value of created amount set aside future expense, or asset 23) An How it is powvisions statement shown in income statement ? are debited in the income cas appropriate expense)

24) as cugnent provisions Liabilities are shown on balance sheet 25) Give 3 examples of provisions (i) provision for et bad & doubt feel debt (ii) provision for wassenties (iii) provision for income taxe distribute as 26) cued to Reserves can be used to dividend to share holdeas. provisions are not permitted distribute as dividend to be