What entry is passed when general reserve is utilised for 1) purchasing an asset 2) incurring an expense? Will this affect the statement of p/l a/c?
Dear Student,
General Reserve is utilised to write off any type of loses or fictitious assets. In your query buying an asset out of general reserve is not an appropriate situation but in case of expense, first of all it should be paid by Debiting Expenses A/c and Crediting Cash A/c. After that expense should be written off by Debiting General Reserve A/c and Crediting Expenses A/c.And it will not affect P&L at all, because it is adjusted through General Reserve A/c.
Regards
General Reserve is utilised to write off any type of loses or fictitious assets. In your query buying an asset out of general reserve is not an appropriate situation but in case of expense, first of all it should be paid by Debiting Expenses A/c and Crediting Cash A/c. After that expense should be written off by Debiting General Reserve A/c and Crediting Expenses A/c.And it will not affect P&L at all, because it is adjusted through General Reserve A/c.
Regards