Skip to content
Short Answer Questions · Q12

Q.Distinguish between 'general reserve' and 'specific reserve'.

Punjab PsebTextbookSubjective· 3mImportance★★★★★est
78% · 43/55 Questions
🔒 Locked · start free trial →

You're viewing a preview — the full solution, concept, methods & PYQ mapping are locked.

Start your 14-day free trial to unlock the full solution →

A general reserve is set aside out of profits without any specific purpose and can be used for any need; a specific reserve is set aside for a particular, named purpose and can be used only for that purpose.

Meaning

  • General Reserve: An amount retained out of profits with no particular purpose in mind. It is meant to strengthen the general financial position of the business and to meet any unforeseen contingency. Because it is not earmarked, it is also called a free reserve.
  • Specific Reserve: A reserve created for a specific/defined purpose, and it can be utilised only for that purpose — e.g., dividend equalisation reserve (to keep dividends steady) or debenture redemption reserve (to repay debentures).

Distinction

Basis of distinctionGeneral ReserveSpecific Reserve
PurposeNo specific purposeA particular, named purpose
UtilisationAvailable for any purpose/contingencyOnly for the purpose it was created for

Unlock everything free for 14 days

  • Full step-by-step solutions
  • Concept-first explanations
  • Methods, shortcuts & mistakes
  • PYQ mapping + timed mock tests

Full access for 14 days. No credit card required.