Question

Distinguish between General Reserve and Reserve Fund.

Answer 1

1. General Reserve: Businesses typically set away a portion of their income as general reserve rather than paying out all of the profits as dividends. Because they are formed for no particular purpose and are available for use for any purpose, these reserves are also known as “Free Reserves.”
2. Reserve Fund: ‘Reserve Fund’ refers to the amount of General Reserve or Specific Reserve that is invested in securities outside the company rather than being used for business purposes.

Answer 2

	General Reserve		Reserve Fund
1.	Amount available against reserve is used in the business.	1.	Amount available against reserve fund is invested in outside securities.
2.	It can be freely used for any purpose.	2.	It is created for a specific purpose and can be used for that purpose only.
3.	General Reserve is not represented by any corresponding asset.	3.	Reserve Fund is represented by a corresponding asset.