can any1 temme d dfiff bet reserve, provision.,general reserve and reserve fund????????????
gayathri kandukuri (student) (27 Points)
27 July 2011can any1 temme d dfiff bet reserve, provision.,general reserve and reserve fund????????????
anbarasan.k.p.
(FM)
(69 Points)
Replied 27 July 2011
Reserve :-The funds that are earmarked by a firm/company from its retained earnings for future use, such as for the payment of likely-to-be-incurred bad debts. The existence of such a reserve means that at least a part of the retained earnings will not be available to the stockholders.Funds taken out of earnings to provide for anticipated future payments and the synonyms of Reserve is Reserve fund (Just an Account)
Provision :- Used as a charge for an estimated expense or loss for future......, Provisions of current year created at the end of the year and paid in subsequent year.. i.e Rent payable for the month of march ll be paid in april then a provision entry ll be made.
General Reserve :A reserve which is created out of the profit not for a specific purpose is known as general reserve.General reserve is used for general purpose as per the discretion of the management. Usually, general reserve is used for strengthening the financial position and meeting future contingencies and losses. General Reserve may be provided against unknown future contingencies, to increae the working capital or merely to strengthen the financial position of the concern. Need to retain profits in the business is the basis for creation of General Reserves. These are free reserves available for any general purpose of the business. As per co's Act u/s 205(2A) - if dividend is declared more than 10% , the percentage of profits required to be transferred to General Reserve. Simply say plough back to the company
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