Unit-22 Provisions And Reserves

You will learn about the meaning of provision and reserve, the difference between provision and reserve, and also the various types of reserves.

Distinguish between Specific Reserve & General Reserve.

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Written on Jun 25, 2019 12:44:11 PM

General Reserve:

1.Reserve created not for any specific and earmarked purpose is known as general reserve.

2.General reserve is created to meet some future contingencies and for strengthening financial position of a business concern.

3.General reserve is utilized to meet any unknown liability.

4.In case of need, general reserve can be utilized for paying dividend

Specific Reserve:

1.Reserve created for some specific and earmarked purpose is known as specific reserve.

2.Specific reserve is created for some specific purpose.

3.Specific reserves can be utilized only for the purpose for which they were created.

4.Usually, dividend can not be paid out of the specific reserves.

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