In the earlier blog, we understood the concept of Investment Allowance Reserve. In today's blog, we understand the concept of Appropriation.
Appropriation in the general scence means setting aside of funds/money for a specific purpose. What this means for an investor is that - by looking at how a company has appropriated its funds; (s)he could understand how it would manage the cash it has.
In the accounting sense of the word, it refers to a fairly common practise for companies to tranfer amount from one of the current profit and loss accounts to vaarious reser ve accounts like, generall reserve, contingency reserve etc. The company's plans to distribute the dividends doesnt go a change, since the company can pay dividends from any of its current or past profits regardless of the account title under which the balance is kept.
Some countries, mandate the tranfer to certain reserves by law.These reserves are not distributable.
Read in Kannada: