Depreciation, Provisions and Reserves — Account STD 11 Commerce — Question

Provision is made to meet an unknown liability.

Depreciation is the process of apportionment of the cost of the asset over its useful life.

Written down value method is followed so that the total burden on Profit and Loss Account in respect of depreciation and repairs put together remains almost equal each year.

Depreciation is provided only on fixed assets except land.

When a bill is renewed, the original bill need not be cancelled.

The system of recording transactions on the basis of their two-fold aspect is called double account system.

Drawer and Payee can be the same person in case of a bill of exchange.

Creditors are external users of accounting information.

Goods taken by the proprietor for domestic use will be credited to Drawings Account.

The main objective of providing depreciation is to calculate true profit.