Question

Difference between general reserve and reserve fund with example

Answer 1

genral Reserve:

1. Reserve is the amount set aside out of profits and other surpluses.

2. The basic purpose of keeping reserve is to meet any contingent liability

3. As the amount of reserve is not kept outside the business in any form so the question of selling does not arise.

Reserve Fund:

1. Reserve fund is the amount of reserve which is invested in outside securities.

2. The basic purpose is to earn regular income from securities.

3. There may be profit or loss on sale of investments in which the amount of reserve is invested outside the business.

Answer 2

HEY MATE HERE ID YOUR ANSWER



The portion of profit that is kept in thebusiness to increase working capital and to strengthen the financial position of the business is known as reserve. ... However, in actual practice no distinction is usually draw between the two, i.e., reserve and reserve fund are used in the same sense.






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