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

CBSE BoardEnglish MediumSTD 11 CommerceAccountDepreciation, Provisions and Reserves3 Marks
Question
What are Reserves?
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Answer

Reserves are the amounts set aside out of profits. It is an appropriation of profits or accumulated profits to strengthen the financial position of the business. Reserves are not set aside to meet a liability or depreciation in the value of assets but is set aside to meet known or unknown contingency that may arise in future.
Examples are General Reserve, Reserve for Expansion, Reserve for Equalisation of Dividends, Reserve for Increased Costs of Replacement, etc.

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