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Determinants of Money Supply

General reser...

Question

General reserve is created to meet contingent liability.

A

True

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B

False

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Solution

The correct option is B False
False. A general reserve is created out of the current year's profit without any specific purpose or objective. They are created to strengthen the company and to meet the liabilities that might arise contingent or not. Hence, it cannot be said that general reserves are created to meet contingent liability. They are created to meet any liability known or unknown.

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Similar questions

Q. General Reserve is created with the objective _________.

Q. General reserve is created on the basis of convention of ______________.

Q. State whether the following Statements are True or False

1. There is need to provide depreciation if it is maintained with care.
2. Depreciation cannot be provided in case of loss in a financial year.
3. A Specific reserve can be created for any purpose.
4. Capital Reserves are not freely distributed as profits.
5. Under the written down value method depreciation is calculated on the original cost of an asset.
6. Depreciation is the process of valuation of asset.
7. Depreciation is a non-cash expense.
8. Secret reserves are disclosed in Balance Sheet.
9. General reserves is created to meet contingency liability.
10. Depreciation is charged only on fixed asset.

Q. Contingent liability is taken due to ___________.

Q. Contingent Liability is _____________________.

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