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Reserve effect on Trial Balance

Others 881 views 9 replies
Hi Am preparing manual Financial statements. I have transferred a portion of profit from P&L to reserve. What changes need to be done in Trial Balance to bring this effect. As there is no profit head in TB, from which head i need to transfer to reserve
Replies (9)
Reserve is shown under profit loss and reserves. Under the companies ACT 2003 accurate disclosure is desirable.
@ Mr Vinay,

Are You prepare the statement for Pvt Ltd company...???

Make profit and loss account and transfer from it.

It's not from profit loss account but it's called appropriation of profit.
Ok but what is the effect to closing trial balance after p&l appropriation account
@ Mr Vinay,

If it's pvt Ltd company...??!

If yes, then its to capital account as Reserve and Surplus _ "SURPLUS IN PROFIT &LOSS"
Please upload the trial before appropriation of profit then it will be easier for us to explain.
When you prepare manual Financial statements you have to first enter Journal entry in "Journal proper " first which is prime entry.

Then you have creat ledgers in " General Ledger book " of both accounts that we have pass journal entry ( as per double entry system ) in Journal proper.

Next at the end of the years as per balances of ledgers either debit or credit , you have to prepare Trail Balance.

Now coming to query , on 31 March you may have pass journal entry of General reserve transfer as follows

Profit & Loos Appropriation A/c Dr
To General reserve A/c Cr
( Transfer to reserve)

General reserve ledger will be having Credit balance, after closing same ledger at the end of the year, you show General reserve under Credit balance in Trail Balance. ( General Reserve will under head Reserve surplus, Capital A/c )
No need to prepare manual accounts
different companies use different software


CCI Pro

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