Pankaj Arora (Learner) (3134 Points)
17 August 2011
Dear All
I was try to understand balance sheet but I don’t know why company transfer their some profit to statutory reserve , general reserve and capital redemption etc. ? and is their any rule in company act that company have to transfer some of their profit respective reserve ? and if company transfer profit to statutory reserve , general reserve and capital redemption than where we can use this fund later in company?
AMIT MISHRA
(Legal Professional)
(393 Points)
Replied 17 August 2011
Dear Pankaj,
Please refer to the following link Companies (Transfer of Profits to Reserves) Rules, 1975https://www.mca.gov.in/Ministry/actsbills/rules/CToPtRR1975.pdf . Also the transfer to reserves is done to make a company financially sound to meet any kind of contingencies in future. Thats obviously for future use by company.
Thanks & Regards
Amit Mishra
BSamrish & Co.
CAclubindia
