Write short note on General reserve.

1.	Write short note on General reserve.
Answer» Meaning: A reserve which is used for general purposes and not for specific purposes is called a general reserve. In short, General reserve is used to maintain the rate of dividend and to increase financial soundness of the business. Explanation: General reserve is created without any specific purpose but to strengthen the financial position of the business. In order to create a General reserve, following accounting entry is passed : Profit and Loss Appropriation A/c Dr To General reserve A/c Uses: General reserve can be used to meet with contingent expenses or losses, distribution of dividend, issue of bonus shares and for future growth of the business.

Answer»

Meaning: A reserve which is used for general purposes and not for specific purposes is called a general reserve. In short, General reserve is used to maintain the rate of dividend and to increase financial soundness of the business.

Explanation:

General reserve is created without any specific purpose but to strengthen the financial position of the business.
In order to create a General reserve, following accounting entry is passed :
Profit and Loss Appropriation A/c Dr To General reserve A/c

Uses: General reserve can be used to meet with contingent expenses or losses, distribution of dividend, issue of bonus shares and for future growth of the business.

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Write short note on General reserve.

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