Doric BPP43

This topic has 3 replies, 2 voices, and was last updated 8 years ago by John Moffat.

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May 19, 2018 at 1:49 am #452761
richardscully
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Dear Sir

Q(b)
I notice reserves don’t come into the picture. When i calculated the amount i added the assets less redundancy plus there were 10 in reserves
Is it a rule to ignore reserves in the case of an acquisition or disposal?

Regards

Richard Scully
May 19, 2018 at 9:34 am #452817
John Moffat
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Share capital plus reserves is simply the book value of the amount owing to shareholders. Reserves are not an asset or liability.
If the company is closed and all the assets are sold, then the shareholders get whatever is left – nothing to do with what share capital and reserves appear as in the SOFP.
May 19, 2018 at 10:08 am #452827
richardscully
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don’t the reserves represent saved cash from retained earnings? like a cash pile for instance.
May 20, 2018 at 9:07 am #452914
John Moffat
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No they don’t! Reserves are the extra owed to shareholders over and above the share capital.
If there is a ‘cash pile’ then it would appear as an asset in the SOFP.
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