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A balance sheet records a company’s assets, shareholders‘ and liabilities equity at a particular point of time and furnishes a basis for calculating rates of return and assessing its capital substructure. It is a financial statement that furnishes a print of what a company possesses and incurs, and the amount invested by investors.
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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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