 # Important Questions for Chapter 7 Depreciation, Provisions and Reserves

Important Questions with Answers for CBSE Class 11 Accountancy Chapter 7 Depreciation, Provisions, and Reserves which is outlined by expert Accountancy teachers from the latest version of CBSE (NCERT) books.

## CBSE Class 11 Accountancy Chapter -7 Important Questions

Question 1

Define Depriciation.

Answer: Depreciation is defined as continuing or permanent decrease in the quantity, value, and quality of assets.

Question 2

What causes depreciation

• By constant use
• By the expiry of a time

Question 3

Give two objectives of Depreciation

Answer: The two objectives of depreciation are

• For ascertaining the true profit and loss by profit and loss account
• For showing the true financial position by the balance sheet

Question 4

State the two factors for determining the amount of depreciation

Answer: The two factors for determining the amount of depreciation are

• The total cost of the asset
• The estimated useful life of the asset

Question 5

What is the scrap value or residual of an asset?

Answer: The scrap value or residual of an asset is the estimated sale value of the assets at the end of its useful life.

Question 6

What is the formula of a depreciable cost?

Answer: Depreciable Cost= Cost of Asset – Scrap Value

Question 7

Define Provisions.

Answer: The amount retained by way of providing for any unknown liability of which the amount cannot be detained with substantial accuracy.

Question 8

State two features of Provisions.

Answer: The two features of Provisions are.

• Provision is arranged to meet a known liability
• The liability is known but the amount of these liabilities cannot be ascertained with reasonable accuracy
• Provision is a charge against profit and as such reduces the profits of the year in which it is created

Question 9

Define Reserve

Answer: Reserve refers to the amount set apart out of profit and other surpluses to meet future risks.

Question 10

If the amount of any unknown liability cannot be determined accurately

1. Provision should be created

2. Definite liability should be created

3. Reserve should be created

4. Should be shown as a contingent liability

Question 11

Give one difference between reserve and provision on the basis of charge or appropriation

Answer: Reserve is an appropriation of profit and provision is a charge against profit.

Question 12

Provision is made to meet the unknown liability. Is it true or false

Question 13

General reserve can be used only for some specific purposes. Is it true or false

Question 14

Depreciation is provided only on fixed assets except for land

Question 15

Depreciation is non-cash expenditure