Filter by Categories
Accounting
Banking

Accounting




General Reserve


A reserve (reserve account) that an entity creates out of its profits for any currently specified or unspecified future purpose. It is usually appropriated out of retain earnings in order to meet future obligation, known and unknown at the time. As the name implies, a general reserve is formed for no specific purpose and can be used for any “general” reason in the future, usually including contingencies and emerging requirements.

By nature , a general reserve is a capital or a equity account. It appears in the statement of financial position (balance sheet) under liabilities and owners’ equity side (the right sided section of the statement).

The double entry for creation of a general reserve is:

Profit & loss (or retained earnings) – Debit

General reserve – Credit

The other main type of reserves is called a specific reserve (which is created for a specific purpose).



ABC
Accounting is the language of business, everywhere, worldwide. It is the means by which virtually every business communicates information about its operations, irrespective of size, scale, objectives, ...
Watch on Youtube
Remember to read our privacy policy before submission of your comments or any suggestions. Please keep comments relevant, respectful, and as much concise as possible. By commenting you are required to follow our community guidelines.

Comments


    Leave Your Comment

    Your email address will not be published.*