The term 'reserves' in the statement of financial position is used to identify:
A) a decline in the fair value of a non-current asset.
B) an amount of retained earnings that is allocated for a specific purpose.
C) the allowance for uncollectible receivables.
D) an amount that is being accumulated to reduce the financial effect of a litigation lawsuit.

Question

Quizplus · Accepted Answer

Reserves refer to funds that are set aside from retained earnings for a particular purpose. These funds are not distributed as dividends and are retained to fund possible contingencies or future projects. Option A refers to depreciation or impairment, Option C refers to bad debt expense and Option D refers to provisions, which are different from reserves.

The Term 'Reserves' in the Statement of Financial Position Is