Why a reserve is created in business? - Vidyadip

Question

Why a reserve is created in business?

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Answer

Following objectives are given below for reserve is created in business:
$(1)$ For strengthening the financial position of the business.
$(2)$ For meeting unforeseen losses (circumstances).
$(3)$ For the future development of the business.
$(4)$ For the economic solvency of the business for long time.
$(5)$ For maintaining the rate of dividend equalization.
$(6)$ To strengthen the liquidity position of the business.
$(7)$ To declare bonus share to company's shareholders.
$(8)$ It is legally mandatory for a company and a Co-Operative Society to create it fordistributing the profits.

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