Table of Contents
What is the treatment of general reserve?
Reserves are the amount of profits, which is set aside until there is a need for money for some purpose. In terms of accounting, we refer to this as appropriation.
What is transfer to general reserve?
General reserve is the reserve created out of the profits of the company which can be used for any purpose i.e., the purpose of its use is not defined. So, the amount to be transferred in general reserve will be: = Total Profits * \% of transfer.
How do you treat general reserve in financial statements?
This general reserve will be considered as part of the profit and loss appropriation account of the company. It will be shown under the head ‘reserves and surplus’ on the liabilities side of the balance sheet of the company.
What is the transfer to reserve?
According to provisions of Company Transfer of Profit to Reserve Rule, 1975, no company can pay or declare dividend out of profit in any year until and unless it transfers a certain percentage of profit to reserve for that year.
What is the treatment of decrease in general reserve in cash flow?
Dear Student, When general reserve decreases, it is to be subtracted from the current year’s profit in the operating activities for the preparation of Cash flow statement.!!
Is General reserve and reserve Fund same?
The portion of profit that is kept in thebusiness to increase working capital and to strengthen the financial position of the business is known as reserve. However, in actual practice no distinction is usually draw between the two, i.e., reserve and reserve fund are used in the same sense.
What is the general reserve?
General reserve is referred to as the reserve fund that is created by keeping aside a part of profit earned by the business during the course of an accounting period for fulfilling various business needs like meeting contingencies, offsetting future losses, enhancing the working capital, paying dividends to the …
What is General reserve Class 11?
General Reserves: These are those which are generally created without any specific purpose. Examples include investment fluctuation reserves, debenture redemption reserves, etc. Revenue and Capital Reserves: This classification is done according to the nature of profits.