Question

How to treat contingency reserve in piece meal distribution?

Answer 1

Contingency reserve Refers to that reserve which is created for the future to meet the uncertain liabilities. There are mostly two types of risks in the business - - identified risk and unidentified risk. Contingency reserve maintained only identified risk.A contingency reserve is created from the profit and loss appropriation account. If there is any liability in the business then this reserve transfer to realisation account and liability will be paid. But if there is no any liability then contingency reserve transfers between the partners...