Accounting · Provisions and Reserves
What is the primary purpose of creating general reserves in accounting?
Verified Solution4 OptionsUpdated: October 2026👁️1 View
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- 1To meet a specific, already identified liability or depreciation
- 2To strengthen the financial position and meet unforeseen future contingencies✓
- 3To write off bad debts written during the current financial year
- 4To artificially reduce the income tax liability of the business
Correct answer
To strengthen the financial position and meet unforeseen future contingencies
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