Are you new to this? You might have heard about General Reserves, Share premium account, Capital Reserves etc.. But what are Hidden Reserves?
Yes, there is a possibility that Hidden Reserves are maintained.
Then How?
Reserves of an accounting entity that are not apparent from its published Balance Sheet, because of the way in which Assets & Liabilities are stated. Usually, there is insufficient analysis of total figures for items in the Balance Sheet.
This is nothing but the understatement of Net Worth of an Entity.
How is this possible?
It is possible by understatement of an Asset and/or overstatement of Liability. Entities may use this as a tool to reduce the Taxable Income or to increase income when there is an insufficient income.
