Doubt on Reserve and Surplus and its Treatment in Balance Sheet

Dear sir,

I would like to say thanks for your guidelines in learning accounts and Tally CD which very helpful of learners.

I have a doubt on Reserve and surplus and its treatment in the balance sheet?

kindly clarify

Thanks and Regards

Kumar MM

Kumar MM, reserve and surplus is just like saving from company's net profit. When company earns the profit. It should be distributed in the form of dividend. But for tolerating the loss in the future, it saves some part of net profit in the form of reserve and surplus and rest is distributed in the form of dividend. So, it is shown in the liability side of balance sheet. As per company law of India, it is necessary to keep some part of net profit in the form of reserve and surplus. When the company will be liquidated, this reserve and surplus will be returned to shareholders with their capital.