Generated by claude-sonnet-4-6 · 2026-06-15 07:08 · grounding rag
Model Answer
Reserves and Surplus refers to the accumulated profits and retained earnings of a company that have not been distributed as dividends to shareholders. It includes general reserves, specific reserves, and the balance in the Profit & Loss Account. It appears on the liabilities side of the Balance Sheet and represents the owners' stake beyond the original share capital.
Source: Chapter 10, Balance Sheet illustration
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Explanation
- Examiners expect a definition + components + position in Balance Sheet for 2 marks.
- Key terms to include: accumulated profits, retained earnings, not distributed as dividends, and liabilities side of Balance Sheet.
- The illustration shows Reserves & Surplus of Rs. 22 crore alongside Share Capital of Rs. 16 crore — use this context if asked for an example.
- Avoid writing a long paragraph; two to three crisp sentences are sufficient.