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Advantages & Disadvantages of secret reserve

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Advantages & Disadvantages of secret reserve

Posted by Anurag Saini 5 years, 11 months ago

CBSE > Class 11 > Accountancy

1 answers

Yogita Ingle 5 years, 11 months ago

Advantages of Secret Reserves
1. Helps in maintaining financial strength of the business.
2. Helps in avoiding the entry of competing business units.
3. Helps in maintaining the rate of dividend during the adverse business conditions.
Disadvantages of Secret Reserves
1. Leads to understatement of profit due to which shareholders get low rate of dividend
2. Financial statement does not show true and fair view
3. Sometimes misused by the management to cover their mistakes.

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