What is Reserves and Surplus in accounting terms?
How it is used and why?
Please explain me with an example
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What is Reserves and Surplus in accounting terms?
How it is used and why?
Please explain me with an example
In general reserves are for current and future expenses that cannot currently be deducted;ie reserve for bad debts, for reserve for litigation.the reserve must be factual and not a supposition. Reserves are charged against earnings
Surplus is retained earnings accumulated from current or prior period.
RESERVE AND SURPLUS:
Reserves and surplusAt the end of an accounting period the company may decide to transfer part of the profits to a reserve and retain the balance in the profit and loss account. The reserve created out of profits transferred from profit and loss account is called general reserve. The balance in the profit and loss account is called a surplus and will be shown under this head in the balance sheet.
The company can use the general reserve for various purposes including issue of bonus shares to shareholders and payment of dividend when profits are insufficient.
The premium received when shares are issued at a premium to the face value is shown under the head reserves and surplus.
Last year profit convert to reserves & surplus
what face value?
what is surrender value?
what is paid-up value?
Face value is the value of the printed amount on the paper or any object being exchanged separate from the intrinsic value of the paper or the object. For e.g.. A paper issue by the government has $ 1000.00 printed on it, that is the face value But the paper value is less than a $ 1.00.
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