_________ can be used to write off preliminary expenses of the company.
Answer & explanation
Correct answer: option 4
The correct answer is Option (4) → Securities Premium Reserve
The use of the Securities Premium Reserve is limited by law to a few purposes, and writing off preliminary expenses is one of them. The book adds that preliminary expenses are written off first from securities premium and the balance from the Statement of Profit and Loss.
Why the other options are incorrect
Option (1) Capital Reserve — Incorrect. Capital reserve holds capital profits (for example, on reissue of forfeited shares); it is not the reserve named for this purpose.
Option (2) Revaluation Reserve — Incorrect. It is an unrealised gain on revaluation of assets and is not available for writing off expenses.
Option (3) General Reserve — Incorrect. The book writes off the balance not covered by securities premium from the Statement of Profit and Loss, not from general reserve.
NCERT (2026-27 edition): |