Balance Sheet Reserves: Definition, Types, and Example If there was a shortage of the specific reserve that was created, Chris Co. would be required to transfer the additional amount from retained earnings, to this particular reserve. However, it must be noted these reserve accounts are temporary accounts, and hence, once the specific purpose is completed, the account no longer exists in the books of the company. These are the accounting entries that are carried out…

Next to revenue, net income is the most important number in accounting. All the expenses are mentioned in the middle, followed by the total revenue. When total revenue is higher than total expenses, this indicates a good net income and is referred to as profitability. On the other hand, the company incurs a loss if its expenses exceed its revenue. For businesses, net income can usually be found on the bottom line of a company’s…