That is, we could find that the legal reserve is part of the benefit that a company in question has received and that has not been distributed, since it has a clear objective both to finance it itself and to increase the value it can have. Therefore, the statutory reserve is based on profits made over the years and is calculated after amortization of contributions for officers, directors, etc., social security contributions and other business costs, as well as©financial and business expenses and expenses. In Colombia, some business companies, such as corporations, are required by law to create a reserve to protect the company`s assets in the event of losses. The law does not distinguish between the type or category of companies, so that whatever it is, by the mere fact that it is foreign, it must constitute the legal reserve under Article 452 of the Commercial Code. Each year, this exercise is carried out until the legal minimum of the reserve is reached, and now the company is free to continue to allocate funds or not to use them or to use less than 10% if it wishes. Assuming a liquid gain of $5,000,000, the intended use of the legal reserve in this case would be ($5,000,000 – income tax) x 10% If that company reaches the point where the annual statutory reserve exceeds one-fifth of the share capital available as its financial guarantee, that statutory reserve becomes the investment currency available to the company; this is explained by the General Law on Commercial Companies (LGSM). As for the accounting of the legal reserve, it is part of the inheritance, more precisely in the 330505 account according to the Colombian uniform chart of accounts. Therefore, the legal reserve consists of 10%, which the company accumulates from the accounting profits it has, for example, only the net assets that the company earned from the last liquidated year is taken. Remember that the reserve is taken from the profits of the year, so the recording or accounting entry would read as follows: This legal reserve is mandatory until it remains in force, so if you want to eliminate it, you will have to change the statutes or statutes. The concept of legal reserve can be used to refer to the assets that a financial institution must deposit with the central bank as collateral for its liabilities. The amount of this reserve varies according to the legislation, although it is usually a percentage applied to a particular concept. The value of the legal reserve is the sum of all the accounting profits that this company has after this sum has already been liquidated without taxes or tax payments, 10% of this sum is available to be destined for the tax reserve of this company. The legal reserve will no longer be mandatory when the 100% is established, as in the legal reserve When the reservation is used, the corresponding value will be debited from the reservation account and credited to the account corresponding to the use of the reservations.
`The limited partnership shall constitute a legal reserve of at least fifty per cent of the subscribed capital, consisting of ten per cent of the net profit for each financial year. If it reaches this limit or the limit provided for in the articles, whichever is higher, the company is not obliged to increase it further, but if it decreases, it will reuse the same ten percent of these profits until the reserve reaches the fixed amount again. `Public limited companies shall constitute a legal reserve of at least fifty%. of the subscribed capital, which corresponds to ten per cent of the net profit for each financial year. Then, this legal reserve is allocated if the company does not cover the compulsory expenses that need to be covered, so that the legal reserve is finally used, so that the company does not have problems of a legal or institutional nature.