Accounting principle based

Reserve Fund is a portion of profit retained by the Company for its future use. It can also be termed as UNDISTRIBUTED PROFIT. The shareholders who are the owners of the Company is also the owner of this profit earned by the company. Hence this is ideally SHAREHOLDERS FUND and is a liability for the Company.

Reserve Fund is Liability of Entity because it is a fund of Shareholde or Partner or Properiter and Reserve Fund amount's application shown in Asset side in form of Cash, Investment, Fixed Asset etc.

This is main reason of tally the Balance Sheet

                 Total Asset Side = Total Liability Side

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