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Distinguish between Networth and free reserves

Manasa Manu (1 Points)

15 November 2018

Distinguish between networth and free reserves

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VIMAL DAK (CA FINAL STUDENT) (26 Points)
Replied 19 November 2018

Net worth is the amount by which assets exceed liabilities. Net worth = Share Capital+Reserves and Surplus(excluding Revaluation Reserve).

Free Reserve includes following items

Profit and loss accounts

General Reserve

Reserve funds

contingency reserve

Dividend equalization reserve

Workmen compensation fund

workmen accident fund

It does not include following

Security premium

Capital reserve

Profit prior to incorporation

pre acquisition profit

Forfeited share accounts

Provident fund

Investment fluctuation accounts

Development rebate reserve