What is reserve and surplus? What is accounting equation?

Reserve and surplus are accounting terms used to describe profits that are not distributed as dividends. Accounting equation is Assets = Liabilities + Equity.

• Reserve is a portion of profits that a com...read more

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Reserve and surplus are accounting terms used to describe profits that are not distributed as dividends. Accounting equation is Assets = Liabilities + Equity.

• Reserve is a portion of profits that a company sets aside for future use, such as expansion or investment.

• Surplus is the amount of profits that remain after all expenses and dividends have been paid.

• Accounting equation is a fundamental principle of accounting that states that a company's assets must equal its liabilities plus its equity.

• Assets are anything of value that a company owns, such as cash, inventory, or property.

• Liabilities are debts or obligations that a company owes to others, such as loans or accounts payable.

• Equity is the residual interest in the assets of a company after deducting liabilities.

• For example, if a company has $100,000 in assets and $60,000 in liabilities, its equity would be $40,000.

• Reserve and surplus are both part of a company's equity.

• Reserve and surplus can be used to fund future projects or investments, or they can be distributed as dividends to shareholders.

Reserves and surplus are the totals of the earnings that are maintained and then reported as a part of the equity of shareholders and set aside by the business for particular objectives.