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Question
Explain the concept of 'secret reserve'.
Explain the concept of 'secret reserve'.
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Solution
Secret reserve is a reserve which generally does not appear in the balance sheet. It is created by increasing the liabilities and decreasing the value of assets. Creation of secret reserves within reasonable limits is justifiable on grounds of expediency, prudence and preventing competition from other firms.
Secret reserve is a reserve which generally does not appear in the balance sheet. It is created by increasing the liabilities and decreasing the value of assets. Creation of secret reserves within reasonable limits is justifiable on grounds of expediency, prudence and preventing competition from other firms.
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