The correct answer is: B. Profits prior to incorporation
A secret reserve is a reserve that is not disclosed in the financial statements. It can be created by a company for a variety of reasons, such as to smooth out earnings, to protect against future losses, or to provide a cushion for future acquisitions.
Premium on issue of shares is the amount received by a company in excess of the face value of its shares. This amount is usually credited to a share premium account, which is a reserve that is not available for distribution to shareholders.
Dividend equalization reserve is a reserve that is created to smooth out fluctuations in dividends. A company may create this reserve in good years and use it to pay dividends in bad years.
Reserve created out of profit on the sale of Fixed Assets is a reserve that is created when a company sells a fixed asset for more than its book value. This amount is usually credited to a revaluation reserve, which is a reserve that is available for distribution to shareholders.
Profits prior to incorporation are profits that were earned by a company before it was incorporated. These profits are not included in the company’s financial statements because they were earned by a different legal entity.
Therefore, the only option that is not a source of secret reserves is profits prior to incorporation.