Journal Entry for Reserve

Reserves are made by company when it earns profit so that when company is in need for funds in future it can use that reserve instead of taking loan or help from others. A loss making company can never make reserves, given below is the journal entry for reserve –

Profit and loss account Dr

         To Reserve account

Since company makes reserve from profit, the profit and loss account is debited so as to reduce the profit and reserve account is credited with that amount.

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