What is Reserve & Surplus? (Meaning, Types, Advantages, and Disadvantages)

Reserves and Surplus are all the cumulative amounts of retained earnings recorded as a part of the Shareholders Equity and are earmarked by the company for specific purposes like buying of fixed assets, payment for legal settlements, debts repayments, or payment of dividends, etc.

Types of reserve and surplus

General Reserve

A general reserve is also known as a revenue reserve. The amount kept separately by an entity from its profits for the future purpose is known as revenue reserves. It is simply the retained earnings of an entity kept aside from the entity’s profits for meeting certain or uncertain obligations.

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What is Reserve & Surplus? (Meaning, Types, Advantages, and Disadvantages)

Originally published at https://www.balancesheetmaker.com on April 11, 2020.