What are reserves ? Give examples VERY SHORT QUESTION
Answers
Answer:
A reserve is gains that have been allotted for a specific purpose. Reserves are usually set up to buy fixed assets, pay bonuses, pay an expected legal settlement, pay for repairs & maintenance and pay off debt.
Explanation:
When an enterprise earns a profit during the end of a year, a certain part of it is retained in the trading concern to meet future exigencies, growth outlooks etc., The amount of money that is kept aside is known as Reserves in Accounting.
They assist in securing the financial situation of an enterprise and can be utilized for different purposes such as stable dividend repayments, expansion, meeting contingencies, legal requirements, investments, improving the financial situation, etc., It is also termed as retained earnings.
For instance – Reserve for Dividends Equalization, General reserve, Reserve for Increased Cost of Replacement, Reserve for Expansion, etc.,
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