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In: 1. Financial Accounting > Ledger & Trial Balance

What is the treatment of general reserve in trial balance?

What is the treatment of general reserve in trial balance?
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    1. Ayushi Curious Pursuing CA
      2021-12-31T12:33:37+00:00Added an answer on December 31, 2021 at 12:33 pm

      In trial balance, the treatment of the general reserve is that it is presented on the credit side.

      A trial balance is a statement prepared to check the arithmetical accuracy of the books of accounts. It features the closing balances of all the assets, liabilities and equity of a business.

      General reserve is a free reserve created out of revenue profits of a business to meet future needs and uncertainties. By free reserve, we mean dividends can be freely declared and distributed out of it.

      Since the general reserve is an internal liability i.e. liability to the owner or owners or the business, it has a credit balance and is hence shown on the credit side of the trial balance.

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