Basic Accounting

Reserves

1. It is created by debiting the profit and loss appropriation account.

2. It is created to meet an unknown liability, or to strengthen the financial position of the company or for equalization of dividends etc.

3. A reserve is created only when there is profit in the business.

4. It can be distributed among shareholders as dividend.

5. The reserve is created without taking into consideration the actual amount required ex Read more