The definition of 'free reserves' is given under clause (43) of section 2 of the Companies Act 2013.
Free reserves means such reserves which are available for distribution as dividend.
The reserves amount as per the latest audited balance sheet of a company is taken for consideration.
What all are not treated as free reserves?
• any amount representing unrealised gains, notional gains or revaluation of assets, whether shown as a reserve or otherwise;
• any change in carrying amount of an asset or a liability recognized in equity, including surplus in profit and loss account on measurement of the asset or liability at fair value.
Whether capital reserve is a free reserve?
Is revaluation reserve a free reserve?
Is securities premium included in free reserves?
Whether debenture redemption reserve is a free reserve?
No.
The capital reserves, revaluation reserves, debenture redemption reserves, securities premium and statutory reserves do not form a part of free reserves.
Bonus Shares
As per Section 63(1), a company may issue fully paid-up bonus shares to its members/shareholders out of its free reserves.
Whether capital reserve is an example of free reserve ??
ReplyDeleteNo
Deletewhether share issue expoense can be written off against free reserves?
ReplyDeleteNo it is not a free reserve because it is not available for distribution of dividend
ReplyDeletePre incorporation profits are free reservves or not
ReplyDelete