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Basic Accounting Knowledge: Preparation And Reserves

2010/12/22 15:41:00 41

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Accounting Preparation Funds

In accounting, "preparation" and "reserve" are used, but the two are totally different.

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"Preparation" is a very important term in accounting, usually with assets.

Impairment

Relevance is the embodiment of the principle of prudence in accounting.

When the impairment of assets is measured according to the relevant accounting standards, the impairment amount should be recognized as the loss of assets impairment, which is included in the profits and losses of the current period, and the corresponding provision for impairment of assets should be made at the same time.

The relevant accounting subjects include "bad debt preparation", "loan loss preparation", "stock price depreciation preparation", "holding to maturity investment impairment allowance", "long-term equity investment impairment allowance", "fixed assets depreciation preparation", "construction project depreciation allowance", "investment real estate value reduction preparation", "intangible assets impairment preparation", "goodwill impairment preparation" and "productive biological assets impairment preparation" and so on.

These are asset class reserve accounts.

More specifically, the general risk preparation subjects in owners' equity accounts.

This subject accounts for the general risk preparation of financial enterprises in accordance with the regulations.

The essence is different from the "preparation" mentioned before, and should belong to the latter "reserve".

reserve

"Reserves" generally exist in the accounting of financial and insurance enterprises.

according to

In accordance with the provisions of the new financial enterprise financial rules, the net profit of financial enterprises this year should be extracted from statutory surplus reserve funds and profits from investors, and general risk reserves should be extracted.

That is to say, when engaging in banking business, the general reserve shall be withdrawn at the end of each year according to a certain proportion of the balance of assets that bear risks and losses, so as to make up for the losses that have not been identified. When engaging in other businesses, the risk reserve shall be extracted from the net profit realized in the current year according to the relevant regulations of the state, and shall be used to compensate for the risk loss.

Such as the "deposit reserve", that is, the funds deposited by the financial institutions to the central bank in accordance with the requirements of the central bank for the purpose of ensuring the clients' withdrawal of deposits and capital liquidation.

In the new accounting standard, the subject of the "reserve" includes the subject of the "receivable sub contract reserve" in the asset class, the "unexpired liability reserve" subject in the liability category, the "insurance liability reserve" subject, the "return insurance liability reserve fund" subject in the profit and loss category, the subject of "undue liability reserve" and the subject of the "insurance liability reserve".

The statutory reserves and excess reserves deposited by banks in accordance with the regulations are accounted for through the "deposit of central bank funds" in asset subjects.

However, in some existing regulations, the "preparation" and the "reserve" should be crossed or merged.

Such as the new enterprise income tax law, it is generally known as the "reserve".

In the regulations on the implementation of the enterprise income tax law, the reserve is interpreted as "reserves for impairment of assets and risk preparation".

In the law of the people's Bank of China, "deposit reserve" and "bad debt reserve" are also appearing.

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The latter refers to "preparation" in accounting.