Explain briefly the difference between Statutory Reserves and Non-Statutory Reserves

April 21st, 2011 Comments off
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In a balance sheet, we often see reserves been categorized into statutory and non-statutory reserves.

Statutory reserves are reserves a company is required to set up by law and which are NOT available for the distribution of dividends


Non-statutory reserves are reserves consisting of profits distributable as dividends, if the company so desires. This type of reserves are set up for a specific purpose like replacement reserves for fixed assets , etc or non-specific like general reserve. This reserve is intended to be kept for future use but LEGALLY any such reserves being NON-statutory is available for the payment of dividends.

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Financial Accounting


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