Assertion (A): When a company earns profit prior to its incorporation, it is called capital profit

Reason (R): Capital profit cannot be used for distribution as dividend to the shareholders.

In the context of the above two statements,  which one of the following is correct?



  • A

    (A) is correct, but (R) is wrong


  • B

    Both (A) and (R) are correct

  • C

    (A) is wrong, but (R) is correct


  • D

    Both (A) and (R) are wrong