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Reserves and surplus are two essential components of a company's financial structure, often found on its balance sheet. They represent the retained earnings and accumulated profits of a company over time. Understanding reserves and surplus is crucial for investors, creditors, and management, as they provide insights into the financial health, stability, and growth potential of the company.

Reserves:

Reserves refer to funds that a company sets aside from its profits for specific purposes or contingencies. These reserves are not distributed as dividends but are retained within the company to support its operations, expansion, or to mitigate risks. Reserves serve as a financial cushion, providing liquidity and stability during economic downturns or unforeseen circumstances.

1. Types of Reserves:

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