Question

Secret reserve is created by way of_________.

• A. excess provision of bad debts
• B. undervaluation of closing stock
• C. excess provision of depreciation
• D. all the three

Answer 1

The correct option is D all the three

Secret reserve is a reserve, the existence and/ or the amount of which is not disclosed in the balance sheet. It is also called as "Hidden Reserves or Internal Reserves."

Secret reserves are created by :

• Excessive depreciation on the asset.
• Excessive overvaluation of liability
• Showing a contingent liability of an actual liability or as provision.
• Charging capital expenditure to revenue or crediting revenue receipts to an asset.