The Reserve which is created for a particular purpose and which is a c...
A specific reserve is one, which is created for some specific purpose by debiting Profit and Loss Appropriation Account. Normally, it is available for the purpose for which it has been created.
View all questions of this test
The Reserve which is created for a particular purpose and which is a c...
Specific Reserve
Specific Reserve is created for a particular purpose and is considered a charge against revenue. It is a reserve fund that is set aside for a specific reason, such as to cover a known liability or to finance a specific project. Here are some key points to understand about Specific Reserve:
Purpose
- Specific Reserve is created for a specific purpose, such as to meet a known liability, finance a project, or any other specific reason.
- It is different from General Reserve, which is created for general business purposes.
Charge Against Revenue
- Specific Reserve is considered a charge against revenue because it reduces the profits available for distribution as dividends.
- It indicates that a portion of the revenue is set aside for a specific purpose before determining the net profit.
Capitalization
- Specific Reserve is usually capitalized in the company's financial statements to reflect the funds set aside for a specific purpose.
- It is important for transparency and accountability in financial reporting.
Examples
- Examples of Specific Reserves include Debenture Redemption Reserve, Dividend Equalization Reserve, and Contingency Reserve.
- Each of these reserves serves a specific purpose and is created to ensure financial stability and meet specific obligations.
In conclusion, Specific Reserve is a reserve fund created for a particular purpose and is considered a charge against revenue. It plays a crucial role in financial management and ensures that funds are allocated for specific needs within the organization.
The Reserve which is created for a particular purpose and which is a c...
A