General reserve treated as a liability in a balance sheet
General reserve treated as a liability in a balance sheet. Because it represents funds that have been set aside by a company’s management to cover potential losses or contingencies. It is a type of reserve created by appropriating a portion of the company’s profits and transferring them to a reserve account. This reserve is not meant for any specific purpose and can be used to meet any future contingencies or losses that may arise. Since the reserve represents funds that the company may need to pay out in the future. It consider as a liability on the balance sheet.
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