Important Questions with Answers for Class 11 CBSE 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
Answer: Depreciation is defined as continuing or permanent decrease in the quantity, value, and quality of assets.
What causes depreciation
Answer: Depreciation is caused by
- By constant use
- By expiry of a time
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
State the two factors for determining the amount of depreciation
Answer: The two factors for determining the amount of depreciation are
- Total cost of the asset
- The estimated useful life of the asset
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.
What is the formula of a depreciable cost?
Answer: Depreciable Cost= Cost of Asset – Scrap Value
Answer: The amount retained by way of providing for any unknown liability of which the amount cannot be detained with substantial accuracy.
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
Answer: Reserve refers to the amount set apart out of profit and other surpluses to meet future risks.
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
Answer: Provision should be created
Give one difference between reserve and provision on the basis of charge or appropriation
Answer: Reseve is an appropriation of profit and provision is a charge against profit.
Provision is made to meet the unknown liability. Is it true or false
General reserve can be used only for some specific purposes. Is it true or false
Depreciation is provided only on fixed assets except for land
Depriciation is non-cash expenditure
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