Class 11 Accountancy Important Chapter 7 Depreciation, Provisions and Reserves

Class 11 Accountancy Important Chapter 7 Depreciation, Provisions and Reserves Solutions English Medium As Per AHSEC New Syllabus to each chapter is provided in the list so that you can easily browse through different chapters ASSEB Class 11 Accountancy Important Solutions and select need one. AHSEC Class 11 Accountancy Additional Notes English Medium Download PDF. HS 1st Year Accountancy Important Solutions in English.

Class 11 Accountancy Important Chapter 7 Depreciation, Provisions and Reserves

Also, you can read the NCERT book online in these sections Solutions by Expert Teachers as per Central Board of Secondary Education (CBSE) Book guidelines. ASSEB Class 11 Accountancy Additional Question Answer are part of All Subject Solutions. Here we have given HS 1st Year Accountancy Important Notes in English for All Chapters, You can practice these here.

Depreciation, Provisions and Reserves

Chapter: 7

IMPORTANT QUESTION AND ANSWER

Short Question and Answer:

1. What is ‘Depreciation’?

Ans: Depreciation refers to the decline in the value of a tangible fixed asset over time due to use, wear and tear, or obsolescence.

2. Why is depreciation important in accounting?

Ans: Depreciation is necessary to accurately ascertain the true profit or loss of a business by accounting for the decrease in asset value. It is a non-cash operating expense that ensures proper allocation of costs over the asset’s useful life.

3. What are the causes of depreciation?

Ans: The causes of depreciation include wear and tear due to usage, expiration of legal rights (like patents), and obsolescence due to technological advancements.

4. Distinguish between the straight line and written down value methods of depreciation.

Ans: The straight-line method allocates an equal amount of depreciation each year, while the written down value method applies a fixed percentage on the reducing balance of the asset’s value.

5. What is the difference between a provision and a reserve?

Ans: A provision is a charge against profit for an expected liability, while a reserve is an appropriation of profits set aside for future purposes or contingencies.

6. What are the different types of reserves?

Ans: Types of reserves include general reserves, specific reserves, revenue reserves, and capital reserves.

7. What is the importance of depreciation for a business?

Ans: Depreciation is important because it helps in accurately calculating profit, adjusting for asset wear, and ensuring compliance with accounting standards.

8. What is a ‘secret reserve’?

Ans: A secret reserve is a reserve created by charging higher depreciation than necessary, which is not disclosed in the balance sheet and helps reduce the apparent profit.

9. What is the difference between capital reserves and revenue reserves?

Ans: Capital reserves are created from non-operating profits like sale of fixed assets, and they cannot be used for dividend distribution. Revenue reserves are created from operating profits and can be used for dividends.

10. Explain the concept of ‘amortisation’.

Ans: Amortisation refers to the gradual writing off of the cost of intangible assets like patents or copyrights over their useful life, similar to depreciation for tangible assets.

11. What factors determine the amount of depreciation?

Ans: Depreciation is determined by the original cost, the estimated salvage value, and the useful life of the asset.

12. What is the accounting treatment for provisions for doubtful debts?

Ans: Provisions for doubtful debts are created by debiting the profit and loss account and crediting the provision for doubtful debts account, which is shown as a deduction from sundry debtors on the balance sheet.

13. How is depreciation calculated for tax purposes?

Ans: Depreciation for tax purposes is calculated based on specific tax rules and may differ from the depreciation methods used in accounting, such as using the written down value method.

14. What is the need for creating a provision for repairs and renewals?

Ans: A provision for repairs and renewals ensures that funds are set aside to cover future maintenance costs, thus accurately reflecting the cost of using fixed assets.