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manish rajpurohit (Querist)
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08 September 2013 chapter amalgmaton..... 1) what iz free, statuary nd non free reserve...some example nd defenation....

CA Pallav Singhania

CA Pallav Singhania (Expert)
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08 September 2013 Certain of the reserves are to be maintained by operation of law such as a reserve to be created under Income-Tax Act to claim deductions and called Statutory reserves...

E.g debenture redemption reserve

Another example could be reserve required to be maintained by banking companies @ 25% of net demand and time liabilities.

Specific reserves are those created for specific purposes. Reserve for unexpired risk is to meet the eventuality of a claim arising out of an existing policy. It can only be used for that purpose, and not for any other purpose. So is the case with dividend equalisation reserve which can be used only to maintain consistency of dividend. such reserves are called nom free reserves..

E.g Dividend equalization reserve

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