Question

Secret reserves are disclosed in Balance Sheet.

• A. True
• B. False

Answer 1

The correct option is B False

False. Secret reserves are the reserves that are not shown in the balance sheet because they are not disclosed to the shareholders, competitors and government either to evade tax, show bad financial position to the competitors etc. They are created to decrease the profits by over charging depreciation, undervaluing inventories, charging capital expenditure to profit and loss account or overstating the liabilities than that of the assets.