Which of the following statement is NOT TRUE in regard to reserve and provision?
Provision reduces taxable profit whereas reserves increase taxable profit.
The correct answer is option 2. Provision reduces taxable profit because it is considered as an expense that has already been accounted for, while reserves increase taxable profit as it is appropriated from profits but not deducted as an expense. Provision is a charge against profit, and reserves are appropriations of profits that are not meant for any immediate liability but are set aside for future uses.
Similar Questions
The original cost of an asset is Rs.1,00,000 with an estimated scrap value of Rs.16,000 at the end of its useful life of 5 years. The depreciation on the asset for its whole life is Rs.84,000, what will be the amount to be charged to the Profit & Loss A/c, if the Sinking Fund table shows that Re.0.180975 if invested yearly @5% p.a. produces Re.1 at the end of 5 years?
Identify the correct pair of the causes of depreciation with its types.
A machine is purchased for Rs7,00,000. Expenses incurred on its cartage and installation Rs3,00,000. Calculate the amount of depreciation @ 20% p.a. according to Straight Line Method for the first year ending on 31st March, 2022, if this machine is purchased on 1st July, 2021.
A machine is purchased for ₹7,00,000. Expenses incurred on its cartage and installation ₹3,00,000. Depreciation is charged @ 20% p.a. according to the Straight Line Method for the first year ending on 31 March 2022. Calculate the difference in the amount of depreciation for the 1st year, if this machine was purchased on 1 April 2021 and if the machine was purchased on 1 July 2021.
Match the following.
Adjustment Treatment in balance sheet I. Depreciation 1. Shown on assets side II. Unexpired expenses 2. Shown on debited side III. Interest on capital 3. Deducted from values of assets IV. Manager’s commission 4. Shown as addition to capital A state of deterioration, damage done to a building or other property during tenancy can be referred to as:
______ system of depreciation is followed in case of those assets which are of small values or where the life of the asset cannot be ascertained with certainty.
________ refers to writing off the cost of intangible assets like patents, copyrights, trademarks, franchises, and goodwill which have utility for a specified period of time.
Which of the following statement is FALSE?
Which of the following statement is FALSE in relation to the term depreciation?
Important Questions from Depreciation, Reserve & Provision
For charging depreciation on which of the following assets, the depletion method is adopted?
Which of the following statements is true?
For depreciation on leasehold property, the appropriate method of depreciation is
Which of the following is not an example of Capital Reserve?
Ways of creating secret reserve
1. by supressing the sale
2. by undervaluing stock-intrade and goodwill
3. by charging excessive depreciation
4. by charging capital expenditure to Profit & Loss A/c
