Important Questions with Answers for CBSE Class 11 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 the expiry of a time
Also Read: What is Depreciation?
Give two objectives of Depreciation
Answer: The two objectives of depreciation are
- To determine true profit.
- To create funds for replacement of assets.
State the two factors for determining the amount of depreciation
Answer: The two factors for determining the amount of depreciation are
- The 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 characteristics of Provisions.
Answer: The two characteristics of Provisions are.
- Provision is an amount set aside to meet a future expense.
- Provisions are recorded as a current liability in the balance sheet.
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: Reserve 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. True or false?
Depreciation is non-cash expenditure. True or false?
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Also Check: Important Questions Chapter 8 Bills of Exchange