Question

When making a cash flow statement, where do you put in 'reserves'? Is it under operating, investing or financing activities?

Answer 1

Answer : operating activities

Explanation : all the provisions and non cash items are adjusted to the net profit under operating activities section of cashflow statement

1) generally reserves are kept aside out of the company's profits

2) Reserves are created for the purpose of meeting the future (known or unknown ) obligations.

3) these are the part of company's profits so they are also caalled retained earnings

4) Reserves are the non cash items and these are created through provision so all the provisions and non cash items are adjusted to the net profit in the cash flow statement (operating activities section ).