Reserves for future expenses

Reserves for future expenses are funds that are shown in the accounting records of the organization. The balances of funds, intended for different purposes, are shown in the corresponding article of the reporting document. The article "reserves of future expenses" is contained in the section on short-term liabilities of the balance sheet. The receipt and application for the previous and fiscal year, as well as balances at the beginning and end of a certain period, are shown in the statement of changes in equity.

The organization can create a reserve of future expenses. It can include funds aimed at the following:

1. Annual payment for long service.
2. Payment of employee leave .
3. Repair of the main production facilities.
4. Payment of annual rewards.
5. Warranty service and repair.
6. Preparatory work, conditioned by seasonal type of activity of the enterprise.
7. Repair items that are intended for use (lease) in accordance with the contract of hire.
8. Reclamation of lands and implementation of other environmental measures.
9. Other unforeseen goals, stipulated in the legislation, as well as regulations.

There are many ways to account for funds. This, in turn, provides a certain freedom in choosing the reflection of the facts that occur in the economic activities of the enterprise. The impact of different methods of accounting on cost or revenue and, accordingly, on the financial result can be quite significant, depending on the objectives pursued by the organization in its activities.

Reserves for future expenses are inventoried at the end of the reporting year. The main purpose of this operation is to check the feasibility of creating and correcting the calculation of reserve funds.

Reserves for future expenses are inventoried on the basis of orders (orders) of the management. A standard form for such an inventory has not been developed, in this connection the accountant has the right to develop his own form. If the accounting in the company coincides with the tax, then this inventory will serve both as an inventory document and as a register.

The specialist identifies the amounts listed in the reserve, and correlates them with all payments that have been made from it. It happens that there is not enough spare money. In this case, amounts that are allocated from other sources will be reflected in other expenses. If the costs are less than the amounts reserved, then in the process of calculating the profit tax, residual funds are included in non-operating income.

Allowed to carry over the remainder of the year. This is possible, for example, if one of the employees did not take leave, or the work on repair of fixed assets was delayed at the enterprise. These amounts are included in the reserve for the coming year and are not taken into account when calculating the profit tax in the current year.

However, in some cases there is a need to specify the amount transferred. For example, with respect to reserved funds aimed at warranty repair, the share of actual costs of repair work in the total revenue for the products for which this warranty service is distributed is taken into account. The transfer of residual funds is possible if the accounting policy of the enterprise provides for the next year the same type of reserve.

It should be noted that earlier, in order to avoid sharp jumps in the cost of production, as well as for an even distribution of expenses for the period, the right to create reserves for future expenses was used at enterprises quite widely. Today, these funds have a slightly different status. Considering them from the side of accounting statements, they are the estimated obligations of the firm.