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Provisions and Reserves — Account STD 11 Commerce — Question

CBSE BoardEnglish MediumSTD 11 CommerceAccountProvisions and Reserves1 Mark
Question
Why 'Dividend Equalisation Reserve' is termed as Reserve and not a provision?
✓

Answer

Dividend Equalisation Reserve is not debited to Profit and Loss Account. Its creation does not reduce the net profits. It is appropriation of profit and is debited to Profit and Loss Appropriation Account.

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