Difference Between Reserves and Surplus
Basis |
Reserves |
Surplus |
---|---|---|
Meaning |
The reserve may be made in cash so that the company can manage revenue reduction or slow-paying debtors | A surplus is a form of excess, and it is not the same as a reserve. |
Source |
Reserves are the retained balance of a company’s profit and loss account after applying dividends and tax provisioning |
Surplus is the remaining balance after these items are paid to shareholders. |
Purpose |
Reserves are the funds earmarked for a specific purpose, which the company intends to use in the future. | The surplus is where the profits of the company reside and set aside after applying all the adjustments. |