Provisions & Reserves

Q.

The double effect of Provision for discount on debtors is:

1. It is shown as a deduction from debtors in the balance sheet.

2. A & B both

3. None of the above

4. It is shown on the debit side of the profit and loss account.

Q.

Goods Destroyed by Fire should be Credited to:

1. Sales A/c

2. Loss A/c

3. Profit & Loss A/c

4. Purchase A/c

Q. is a charge against profits.

1. Reserve
2. Provision
3. Assets
4. Incomes

Q.

Distinguish between capital and revenue expenditure and state whether the following statements are items of capital or revenue expenditure.
(a) Expenditure incurred on repairs and whitewashing at the time of purchase of an old building in order to make it usable.
(b) Expenditure incurred to provide one more exit in a cinema hall in compliance with a government order.
(c) Registration fees paid at the time of purchase of a building.
(d) Expenditure incurred in the maintenance of a tea garden which will produce tea after four years.
(e) Depreciation charged on a plant.
(f) The expenditure incurred in erecting a platform on which a machine will be fixed.
(g) Advertising expenditure, the benefits of which will last for four years.

Q.

Give four examples each of 'Provision' and 'reserves'.

Q.

What are the informational needs of internal users?

Q.

Classify the above mentioned accounts (in Question 1.IA) into Asset, Liability, Capital, Revenue and Expenses.

Q.

The Trial Balance of Dhanashri Stores as on 31st March 2009 was as follows, Prepare Trading and Profit and Loss A/c for the year ending on 31st March, 2009 and Balance Sheet as on that date.

Trial Balance as on 31st March, 2009
Particulars	Debit Amount Rs	Particulars	Credit Amount Rs
Purchases Opening Stock Debtors Wages Salaries Land & Building Plant and Machinery Furniture Advertisement 15% Investment Insurance Cash in hand Rent Power and Fuel Drawing Accrued Interest on Investment	25, 000 12, 000 20, 000 5, 000 8, 000 30, 000 25, 000 16, 000 6, 000 10, 000 2, 000 5, 500 7, 000 3, 000 3, 000 500	Capital Sales Creditors Bank Loan Commission Discount Interest on Investment	70, 000 70, 000 21, 000 10, 000 5, 000 500 1, 500
Total	1, 78, 000	Total	1, 78, 000

Q.

______ is the part of profits that are kept aside for unexpected expenditure.

1. Both A & B

2. Provisions

3. None of these

4. Reserves

Q.

In which book of original entry will:

(i) The partial recovery from Mr. Ajay of an amount of Rs. 4, 000 earlier written off as bad debts be recorded?

(ii) In which book of original entry, a discount of Rs. 50 offered for an early payment of cash of Rs. 1, 050 be recorded?

Q. is the amount of profits that are kept aside for expected expenditure.

1. reserves
2. provisions
3. assets
4. liabilities

Q. Select the most appropriate answers from the alternatives given below and rewrite the sentence.

Reserves arising from capital receipts are known as __________.
a) Capital Reserves
b) Reserve fund
c) Secret Reserve
d) General reserve

Q. is the amount of profits that are kept aside for unexpected expenditure.

1. provisions
2. reserves
3. assets
4. liability

Q.

______ is the amount of profits that are kept aside for expected expenditure.

1. Reserves

2. Provisions

3. Both A & B

4. None of these

Q. Discount Allowed appearing in the Trial Balance are shown:

1. On the debit side of Profit & Loss A/c
2. On the debit side of Trading Account
3. On the Assets side of the Balance Sheet.
4. None of these

Q. Where do reserves appear in a balance sheet? Give a few examples of reserves.

Q. Dividend equalization reserve is an example of general reserve.

1. true
2. false

Q. Creation of reserves ______ the amount of profits available for distribution among the owners of the business.

1. Neutralize
2. Reduces
3. Increase
4. None of the above