The correct answer is: C. Capital reserve
A capital reserve is a type of reserve that is created from the profits of a company. It is used to meet future capital expenditure or to provide a cushion against unexpected losses.
A revenue reserve is a type of reserve that is created from the profits of a company. It is used to meet future revenue expenditure or to provide a cushion against unexpected losses.
A secret reserve is a type of reserve that is created by a company to hide its true financial position from its shareholders or creditors. It is usually created by transferring profits from the profit and loss account to a secret reserve account.
A general reserve is a type of reserve that is created by a company to meet any general purpose. It is usually created by transferring profits from the profit and loss account to a general reserve account.
In accounting, the profit prior to incorporation is treated as a capital reserve. This is because the profit is not yet part of the company’s assets and liabilities. It is only after the company is incorporated that the profit becomes part of the company’s assets and liabilities.