4:15 AM
imran ali
The firm requires to manage big amount to redeem long term liabilities like debentures. Thus, a reserve is created out of profit for the redemption of liabilities which is called reserve for redemption of liabilities.
Advantages:
- Loan can be repaid in specific date which increases the creditability of the business.
- It helps to avoid the financial crises of repaying liabilities.
- It reduces the amount of divisible profit of shareholders.
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Accounting
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