entries for Reserve & surplus
What is reserve & surplus in accounts
Reserves always created from profit. Therefore the Journal entry will be for creating reserves Dr Profit & Loss A/c CR Reserve A/c
by balance sheet under reserves and surplus heading otherwise in profit and loss appropriation a/c
[Debit] Net income account [Credit] General Reserves
General reserves need to be converted into cash first by issuing new shares to share holders and after that cash can be used to purchase assets.
What is reserve & surplus in accounts
A reserve is a planned amount, a surplus is unplanned.
reserves and surplus are shown into liability side of the financial statiment, since reserve is the money set aside from the capital for future use hence defining surplus as a debit in the business thus attributing to its liabiltiness,
Amount appropriated out of earned surplus (retained earnings) for future planned or unforeseen expenditure.
reserves surplus
The net loss reserves to surplus ratio is a financial metric used in the insurance industry to assess the adequacy of an insurer's reserves relative to its surplus. It is calculated by dividing the net loss reserves (the funds set aside to pay future claims) by the surplus (the difference between assets and liabilities). A lower ratio indicates a stronger financial position, suggesting that the insurer has sufficient surplus to cover potential claims, while a higher ratio may signal potential financial strain. Monitoring this ratio helps regulators and stakeholders gauge the insurer's risk management and financial health.
Reserves always created from profit. Therefore the Journal entry will be for creating reserves Dr Profit & Loss A/c CR Reserve A/c
by balance sheet under reserves and surplus heading otherwise in profit and loss appropriation a/c
Surplus Reinsurance
[Debit] Net income account [Credit] General Reserves
Read your governing documents to determine how 'restricted reserves' are treated as accounts. Often, and state laws can dictate -- that 'restricted reserves' are mandated to be kept in separate accounts, in a bank, for example. Whether these are 'maintenance reserves' , 'capital reserves' or 'insurance deductible reserves', your chart of accounts should differentiate (each of) them from the association's operating account.
You would post the surplus credit into the 'Unassigned credit' entry.