What is a reserve accounting?

In finance, reserve accounting concerns how they are calculated, used, and, most importantly, take into account. There are different types of accounts ranking companies or enterprises such as cash account and expenditure account. Similarly, there is a reserve account with its own book and balance sheet. In fact, the word "reserve" refers to any part of the shareholder's own capital, except for their registered capital. The shareholders' capital, also called the shareholder funds or its own capital, applies to the remaining interest on the Company's assets after all obligations have been paid. This interest is often properly divided among all shareholders.

Another way of understanding the reserve is how the profit is realized from the interests. The company's reservation can be transferred back to the business to keep it running, especially in difficult times. In the past, the reserve was interchangeably used with another accounting term "provisions". Aletoto use has now been interrupted. Not include accounting accountingE provisions that now apply to the amounts set for depreciation losses, known obligations and unforeseen events. Other provisions, which are also not within the backup accounts, are the provisions for pension benefits, severance pay and reorganization.

items that fall into reserve accounting include stocks of equity, which are created from the company's profits, undivided earnings and shareholder contributions. The contributions of shareholders usually come in the form of an insurance premium per share, a surplus from shareholders exceeding the nominal value of their shares and funds of legal reserves that are required in various legal regulations. Meanwhile, reserves created by profit often come from reserves of remuneration and translation, as well as from legal reserves.

A simple way to distinguish between and reserves provisions is that the first must be "secured" by the company, as the word suggests because it is jEdna about the necessary expenses that ensure the survival of the company. Meanwhile, reserves such as accessories or excess profits and undivided earnings. However, this does not mean that reserves can be spent freely. It is dictated in business that reserves are stored on a rainy day.

In reserve accounting, two types of reserves are considered. These are capital reserves and revenue reserves. Capital reserves are those that result from profits, but this cannot be divided between shareholders or employees as bonuses or dividends. There are many types of capital reserves; Some examples are sharing premiums, legal reserves and reserves of exchange fluctuations.

Meanwhile, examples of reserve revenue are general reserves and maintained profits. Unlike capital reserves, they can be distributed as cash shares or bonuses. Again, caution dictates just because they can be distributed that does not mean that all revenue reserves are to be distributed. Some part is always reserved to serve other purposes.