A reserve can be defined as one which is created by retention of profits of the company. Here is the list of various types of reserves which company can create –
1. General Reserve – When the purpose for which reserves is created is not specified it is termed as general reserves. It can be used by the management of the company for any purpose.
2. Dividend Equalization Reserve – It is created specially for dividends so that a constant dividend rate can be maintained. In years of high profits some amount is transferred to the reserves and in year of low profits dividend is paid from such reserves.
3. Debenture Redemption Reserve – This reserve is created so that company does not face financial difficulties while redeeming the debentures.
4. Investment Fluctuation Reserve – This reserve is created for so as to provide for the loss in investments which company makes overtime.
Apart from above there can be classification of reserve into capital reserve which is the reserve created out of the sale of fixed assets and revenue reserves which are created out of the normal business activities of the business of the company.