What is the difference between reserve and allowance?
Perhaps 50 years ago, accountants in the U.S. used Reserve for Bad Debts as the title of the contra account associated with Accounts Receivable or Loans Receivable. They also used Reserve for Depreciation as the title of the contra account associated with plant assets. The use of the word reserve led some readers of the financial statements to conclude that money was set aside for replacing plant assets or the uncollectible accounts or loans. To avoid this misunderstanding, the accounting profession recommended that the word reserve have a very limited use. Accountants now use Allowance for Doubtful Accounts or Allowance for Bad Debts instead of Reserve for Bad Debts. In the case of plant assets, Accumulated Depreciation is used in place of Reserve for Depreciation.
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Thank you for giving me information about most tricky questions.
What are the types of depreciation?
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I have just concluded working on the balance sheet of a company and it turns out that on the liability and equity side of the balance, there is a negative reserve. I believe its a capital reserve. My question is, can it be possible to have a negative reserve? if yes, what is the implication of that to the company? if no, could it be that the negative “reserveâ€shown in the balance sheet is actually under a wrong heading? Please advice. Thanks
i want format. cost of machine. topic (depreciation)
i want to know that what is difference between provisions & reserves
i want to know how provision for bad debts and depreciation are treated in the final accounts