Free reserves

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rushi shah

rushi shah (Querist)
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31 December 2013 Is any other kind of free reserves except profit and loss account and General reserve??

Guest

Guest (Expert)

31 December 2013 Free reserves are those reserves upon which the company can freely draw. There is no specific purpose for these reserves. Free reserves can be used by the company to declare dividends, to issue bonus shares, to write off accumulated losses and to write off share issue expenses.
For example, general reserve is a free, voluntary, revenue reserve.

CA Pallav Singhania

CA Pallav Singhania (Expert)
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31 December 2013 Yes it is considered. as per section 372A (b) "free reserves" means those reserves which, as per the latest audited balance sheet of the company, are free for distribution as dividend and shall include balance to the credit of the securities premium account bat shall not include share application money.]

Free reserves are those which are not made for some specified purpose like Debenture redemption reserve of revaluation reserve.

P&L A/c is a free reserve and so the surplus standing to it will be considered for loan purpose under section 372A of the Companies Act.

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