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Can loss in surplus be set off against general reserves?

Anirudh Hegde (CA >> Practice)     24 September 2015

Anirudh Hegde
CA >> Practice 
 1 likes  87 points

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Can loss amount in surplus be set off against general reserves as per Companies Act, 2013? 


Opening balance - loss in Surplus Account - Rs (5,00,000)

Current year profits - Rs 12,00,000

General Reserves set apart in earlier years Rs 6,00,000

1) Now can I set off the opening negative balance of Rs 5 lakhs against reserves of Rs 6 lakhs so that I can fully distribute current year profits? (6 lkahs -5 lakh)

2) Or do I first have to set off the loss in surplus account against current year profits?  (12 lakhs -5 lakhs?)

Option 1 allows for maximum distribution of dividend. But is that possible? 

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