Reserves
Reserves are parts of equity built from undistributed profits; the law requires an allocation to the statutory retained earnings reserve, while further reserves may be created by the articles or by resolution.
Definition
In corporations, the statutory retained earnings reserve has to be funded with five per cent of the annual profit until, together with the statutory capital reserve, it reaches half the capital. Only then is the profit freely available.
Reserves are not money in an account but an allocation within equity. The amount sits in the company’s assets — in stock, machines or receivables.
The wording
5 per cent of the annual profit must be allocated to the statutory retained earnings reserve. Where there is a loss carried forward, this must be eliminated before the allocation to the reserve.
The numbers
- 5%
- of the annual profit must be allocated to the statutory retained earnings reserve Art. 672 CO
Where to read it
What the software must be able to do
The check is whether the appropriation of profit can be represented as entries: allocation to reserves, distribution, carry-forward. Without that area, equity gets corrected at the fiduciary every year.
Checked Aug 2026
More terms under Bookkeeping and retention: Accrual principle Accrued liabilities Annual accounts Association accounting Balance sheet Balance sheet total Book value Break-even point Business assets Business expenses Cash book Cash flow statement Cash receipts Contribution margin Cost centre Current assets Debit and credit Depreciation Double-entry bookkeeping Duty to keep accounts EBIT EBITDA Equity Equity ratio Financial year Fixed assets Fixed costs Foreign currency General ledger Gross profit Hidden reserves Income statement Inventory count Journal Journal entry Liabilities Liquidity Loss carry-forward Membership dues Net profit Opening balance sheet Overheads Pass-through item Prepaid expenses Provision Record-keeping ordinance Retained profit Simple accounts Swiss SME chart of accounts Tamper resistance Turnover Value adjustment Variable costs Volunteer-run structure Voucher Year-end closing modules