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Question : Any reserve which is not apparent on the face of the balance sheet is known as?

(a) General Reserve (b) Bad Debt Reserve (c) Hidden Reserve (d) Capital Reserve

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Question added by خالد ابراهيم , Senior Accountant , Al Khayyat Group /Peugeot and Mazda Automative agent in Jordan
Date Posted: 2013/11/20
Mohammed Salim Allana
by Mohammed Salim Allana , Compliance and Assurance Manager , United Arab Bank

(c) Hidden Reserve 

Dasarathi Rath
by Dasarathi Rath , Sr. Accountant , Al Luban Special Investment LLC

Bad Debt Resurve...

HANNA SABA
by HANNA SABA , Team Leader (Administrative Support), including translation, editing, and writing , Deloitte

A hidden reserve, sometimes called a secret reserve, is a value that does not appear in the balance sheet. It results from understating assets and/or overstating liabilities. This leads to having a net equity per books less than the actual net equity. This, of course, is false reporting and illegal. Sometimes, it is done for tax evasion. A company may overdepreciate its fixed assets per books in order to increase its depreciation expense, lower its profit, and,therefore, pay less tax. This also causes an increase in accumulated depreciation and a decrease in the net book value of fixed assets. This kind of practice relates to what is called cookie jar accounting.

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