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Depreciation, Provisions and Reserves — Account STD 11 Commerce — Question

CBSE BoardEnglish MediumSTD 11 CommerceAccountDepreciation, Provisions and Reserves1 Mark
Question
Reserve is not a liability in the real sense. Do you agree with this statement?
✓

Answer

Yes, Reserve is not a liability in the real sense. It represents accumulated divisible profit which belongs to the shareholders or partners just like capital and has not been distributed as dividend as yet; that is why it is shown on the liabilities side of the Balance Sheet.

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