Reserve capital as a tool for minimizing business risks in strategic management system: accounting aspect

Abstract

The normative-legal regulation of accounting of formation and use of reserve capital is established. Legislative regulation of the minimum size of reserve capital for different types of companies has been clarified. For joint-stock companies, in contrast to other types of companies, the legislation provides for the possibility of reducing the minimum deductions (including up to 0 %) when the reserve capital reaches the minimum size. A statistical analysis of the structure of equity by type of economic activity is made. It is established that out of 15 types of economic activity, only three (agriculture, forestry and fisheries; education; provision of other services) have profitable activity. Profitable types of economic activity are characterized by the dominance of retained earnings or additional capital in the structure of equity, with reserve capital occupying a small share. The common features and differences of additional and reserve capital are established. Common one is the creation of various funds, the source of which is net income. A distinctive feature is the ability to use funds. Additional capital provides for the creation of a fund for the renewal of non-current assets, employee motivation, etc. and the use of funds for these needs. Unlike additional capital, reserve capital is formed to eliminate crisis moments in the enterprise, reaches a certain size and may not be used for years, because it has a clear purpose – to cover losses, pay dividends on preferred shares and guarantees to creditors in liquidation. The method of accounting of reserve capital, which allows distinguishing the minimum level defined by the legislation and the sum exceeding the minimum size is offered.

Keywords

• reserve capital
• risks
• accounting policy
• additional capital
• strategic management