Reserve and surplus

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A negative figure in reserves and surplus indicates that a company has incurred losses, meaning its liabilities exceed its assets. This can also occur if a company pays dividends higher than its reserves. For equity investors, a negative net worth is a warning sign, suggesting there may be no assets left for shareholders if the company closes. It's crucial to monitor your company's net worth, especially if it's making losses, as it could signal a need to exit your investment.

imran khan

imran khan (Querist)

20 January 2021 If the Reserves and surplus comes as negative figure what it means

CA R SEETHARAMAN

CA R SEETHARAMAN (Expert)

21 January 2021 It means loss incurred......

CA Rashmi Gandhi

CA Rashmi Gandhi (Expert)

22 January 2021 You are suffering from loss and your liabilities are more than your assets

Aashok Kumar Sharma online

Aashok Kumar Sharma

(Expert)

26 January 2021 Besides all this, if a firm decides to pay dividend far higher than the outstanding balance in its reserves and surplus account, it may lead to a negative or deficit networth.

If you are an equity investor, it is pertinent to keep a tab on your company’s networth. It will tell you if there are any assets left for you as a shareholder, should the company’s operations become unviable and warrant closure. If the company’s networth is negative or deficit and the entity makes losses, it may be a warning signal for you as an investor to exit your investment.

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