what is Reserve and why it is important
Answers
Answer:
Reserves help in strengthening the financial position of the business enterprise. They are not created to meet any liabilities, contingencies or commitments. It is important to mention here that the business cannot create reserves in anticipation of some losses; however, in case of loss, reserves can be utilized.
Reserves are sometimes set up to purchase fixed assets, pay an expected legal settlement, pay bonuses, pay off debt, pay for repairs and maintenance, and so forth. This is done to keep funds from being used for other purposes, such as paying dividends or buying back shares.
Answer:
A reserve is profits that have been appropriated for a particular purpose. Reserves are sometimes set up to purchase fixed assets, pay an expected legal settlement, pay bonuses, pay off debt, pay for repairs and maintenance, and so forth. ... Thus, funds designated as a reserve can actually be used for any purpose
Reserves help in strengthening the financial position of the business enterprise. They are not created to meet any liabilities, contingencies or commitments. It is important to mention here that the business cannot create reserves in anticipation of some losses; however, in case of loss, reserves can be utilized.