Explain Specific reserve.
AccountancyClass 11CBSEAnswered 23 Jun 2026
Answer
Specific reserve is the reserve, which is created for some specific purposes and can be utilized only for that purpose. Example of specific reserve are:
- Dividend equalization reserve: This reserve is created to stablise or maintain dividend rate. In the year of high profit, amount is transferred to Dividend Equalisation reserve. In the year of low profit, This reserve amount is used to maintain the rate of dividend.
- Workmen compensation fund: It is created to provide for claims of the workers due to accident, etc.
- Investment Fluctuation Fund: It is created to make for decline in the value of investment due to market fluctuation.
- Debenture redemption reserve: It is created to provide funds for redemption of debenture.
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