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Reserve effect on Trial Balance

vinay (Trainee CMA) (238 Points)

09 August 2023

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

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9 Replies

sabyasachi mukherjee (26083 Points)
Replied 09 August 2023

Reserve is shown under profit loss and reserves. Under the companies ACT 2003 accurate disclosure is desirable.

RAJA P M ("Do the Right Thing...!!!") (127177 Points)
Replied 09 August 2023

@ Mr Vinay,

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

Manish (CA) (1079 Points)
Replied 09 August 2023

Make profit and loss account and transfer from it.

sabyasachi mukherjee (26083 Points)
Replied 09 August 2023

It's not from profit loss account but it's called appropriation of profit.

vinay (Trainee CMA) (238 Points)
Replied 10 August 2023

Ok but what is the effect to closing trial balance after p&l appropriation account

RAJA P M ("Do the Right Thing...!!!") (127177 Points)
Replied 10 August 2023

@ Mr Vinay,

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

If yes, then its to capital account as Reserve and Surplus _ "SURPLUS IN PROFIT &LOSS"

sabyasachi mukherjee (26083 Points)
Replied 10 August 2023

Please upload the trial before appropriation of profit then it will be easier for us to explain.

prasad Nilugal ( GST Practitioner & Accounts ) (14171 Points)
Replied 10 August 2023

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 )