Question

two example of reserves and surplus ​

Answer 1

Answer:

Reserves - are usually money earmarked by the company for specific purposes.

Surplus - is where all the profits of the company reside.

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Answer 2

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Answer:

• Reserves are usually money earmarked by the company for specific purposes. Surplus is where all the profits of the company reside.

• Let’s take the example of a Corporation named Computer Web Inc., which is doing the business of computers and laptops. The earnings of the corporation from its normal course of the operation during the financial year 2017–18 were $ 500,000. It is decided by the management of the company to keep aside 8 % of the profits earned during the financial year for meeting future liabilities, i.e., for General Reserve and corporation has issued shares for which they have received premium amounting to $ 25,000

• Also, the amount present in capital redemption reserve and dividend reserve amounted to $ 14,000 and $ 19,000 respectively during the same period. Now we need to calculate the total amount of reserves and surplus, which is the sum of the general reserve, share premium account, capital redemption reserve, and dividend reserve.

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