Meaning of Secret Reserve Introduction
Secret reserves mean such reserves which are not shown directly in the balance sheet even though they exist in the organization. The economic condition of the organization in which the secret accumulation exists,
2. what do you mean by secret reserve
Secret Reserve is much better than the economic condition shown. In the case of hidden reserves, the assets are shown at a value less than the actual value and the liabilities are shown at a value higher than the actual value.
3.secret reserve can be created by
According to de Paula, “Secret savings are those which are not shown in the balance sheet, as a result of which the economic condition shown in the balance sheet is much better than the actual condition”.
4.secret reserve is permitted to which company
A secret reserve is created by all Secret company the actual net profit or show net profit less than actual in the balance sheet of the organisation. Secret reserves are maintained by organisations such as insurance, bank , companie, bank and other types of etc.
5.secret reserve means
The economic condition of the organization in which the secret accumulation exists, is much better than the economic condition shown. In the case of hidden reserves.
6. secret reserve in auditing
A secret reserve is the amount by which the assets of organization are understated or company the actual net profit its liabilities are overstated. An entity might establish a secret reserve for competitive reasons, to hide from other business that it is in a bettered financial positions than appear in its financial statements. However, a secret reserve means that the information provided to shareholder is false and true misleading.
7.what is a secret reserve
Secret reserves are maintained by organisations such as insurance, bank , companie, bank and other types of etc.
8. window dressing and secret reserve
Creating provision on current assets are the ways or methods of window dressing in the hands of accountants etc.
The creation of secret reserve, under and over valuation of inventorie shitting method of depreciation,
9. merits and demerits of secret reserve
Defects of Secret Storage
(1) The profit and loss account does not reflect the true profit of the concern due to the creation of secret reserves
(2) With this, the properties of the institution can be easily embezzled.
(3) Due to secret accumulation, the balance sheet does not reflect the true financial position of the organization.
(4) Management inefficiency can be easily hidden by secret savings. (5) Creation of secret reserves reduces the amount of profit due to which the market value of shares decreases.
It seems and the reputation of the organization gets tarnished.
(6) Due to the policy of secret accumulation, assets are shown at lower value in the balance sheet due to which less amount of insurance is received from the companies.
10. Benefits of Secret Storage
(1) The economic condition of the institution is strengthened through secret accumulation.
(2) Secret savings increase the working capital of the organization.
(3) Due to this, the competitors of the organization do not get to know about the real benefits, due to which there is a decrease in competition.
(4) Economic crises can be easily faced through secret accumulation.
(5) By this the rate of profits can be kept constant so that the interest of the public in the institution can be maintained.
(6) Policies caused by mismanagement can be suppressed through secret reserves
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