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WHAT ARE THE DIFFERENCE BETWEEN RESERVES AND PROVISIONS?
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Answer Posted / k. phalguna rao
Reserves: every year transfer some amount from net profits
of the company for future needs to purchase plan &
machinary
for Ex: Machine value 10 lacs and it's working capacity 10
years it means every year it's working capacity will be
reduced after 10 years this machine value become 0 so we
have to purchase new machine for purchase the machine we
have to spend huge money so we cannot effort from working
capital
New machinary will be purchased with the funds of Reserves
and surplus
Provisions: Generally provisions are made for two things
first one is for Bad debts and second one is for year end
adjustments
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how history is helpful for banking?
From the following information you are to prepare a Cash Budget for the period from July to December 2008. (i) The estimated sales and expenses are as follows: June July Aug. Sep. Oct. Nov. Dec. Sales 35,000 40,000 40,000 50,000 50,000 60,000 65,000 Purchases 14,000 16,000 17,000 20,000 20,000 25,000 28,000 Wages & Salaries 12,000 14,000 14,000 18,000 18,000 20,000 22,000 Expenses 5,000 6,000 6,000 6,000 7,000 7,000 7,000 Interest Received 2,000 - - 2,000 - - 2,000 Sale of Fixed Assets - - 20,000 - - - - (ii) Sales are 20% in cash and balance on credit. 50% of the debtors are collected in the month of sales and the remaining in the next month. (iii) The time lag in payment of purchases and expenses is 1 month. However, wages and salaries are paid fortnightly with a time lag of 15 days. (iv) The company maintains a minimum cash balance of Rs. 5,000. The cash balance in excess of Rs. 7,000 is invested in government securities in multiples of Rs. 1,000. Short falls in cash balance are made good by borrowing from banks. The interest received as well as paid is to be ignored.
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