Give two differences between provisions and reserves. - Vidyadip

Question

Give two differences between provisions and reserves.

✓

Answer

Difference between Provision and Reserve:

	Basis of Difference	Provision	Reserve
1.	Meaning	It is created to meet a known liability	It is created to meet an unknown liability.
2.	Necessity (Charge or Appropriation)	Creation of provision is a legal necessity. Provisions have to be provided for even if there are no profits. Thus, provision is charge against profit	Creation of reserves discretionary. It adequate. Thus, reserve is an Appropriation of Profit.
3.	Object	The object is to provide for depreciation, doubtful debts and other specific liabilities.	The object of reserves is to strengthen the finacial position of the business.

Need a full question paper?

Generate a complete, print-ready paper with questions like this in minutes — across 16+ boards, with answer keys.

Start Generating Free

Explore more

More "3 Marks Question" from Depreciation, Provisions and Reserves→Depreciation, Provisions and Reserves — all question types→Account STD 11 Commerce question papers→CBSE Board STD 11 Commerce question papers→CBSE Board question paper generator→

Similar questions

Distinguish between debtors and creditors.

Raja Ltd. purchased securities for ₹ 50 lakh. At the end of the year, the market value of such securities was ₹ 40 lakh. While preparing the financial statements, the company valued the securities at cost i.e. at ₹ 50 lakh. Is it a correct treatment?

Prepare the Vouchers:

2019	Particular	₹
Jan-5	Received cash from Wahi & Co. on account vide cash receipt No. 551	10,000
Jan-10	Commission received vide cash receipt No. 520*	10,000
Jan-15	Sold leather purses for cash vide Cash Memo Nos. 307-310*	6,000
Jan-24	Sold two old machines vide Cash Memo No. 1560*	3,000

Transactions marked with * are subject to levy of CGST and SGST @ 6% each.

Distinguish between revenue expenditure and capital expenditure.

Open 'T' shape account of our Creditor 'X' and write the following transactions on the proper side:

		(₹)
1.	Purchased goods from X on Credit	40,000
2.	Paid to X	30,000
3.	Returned goods to X	6,000
4.	Purchased goods from X for Cash	20,000
5.	Purchased goods from X on Credit	50,000
6.	Paid to X	45,000

Explain the meaning of the following term:
Capital.

Briefly explain the elements of Statement of Comprehensive Income.

What is Contra Entry?

On 31st March, 2019, the balance as per the Bank Statement was ₹ 10,000 debit. On the same date, outstanding cheques amounted to ₹ 30,000 and outstanding deposits amounted to ₹ 50,000. Also, there was a dishonoured cheque from a customer of ₹ 5,000 recorded in the Bank Statement but not in the Cash Book. On the basis of the above information, determine the balance as per the Cash Book.

On 1st April, 2019, the position of Tendulkar was as follows: Stock-in-Hand ₹ 2,88,000; Bills Payable ₹ 48,000; Cash at Bank ₹ 2,16,000; Plant and Machinery ₹ 1,20,000; Debtors ₹ 60,000; Creditors ₹ 96,000; Investment ₹ 2,40,000, Loan from Suresh ₹ 1,80,000. What was the amount of Tendulkar's capital on the date? Pass an opening Journal entry.