Class 11 Accountancy - ANDHRA-PRADESH
Depreciation Provisions and Reserves
The chapter 'Depreciation Provisions and Reserves' in Class 11 Accountancy for Andhra Pradesh (BSEAP) students explores the systematic allocation of fixed asset costs over their useful lives and the creation of financial safeguards. Students will learn the causes and methods of calculating depreciation, primarily the Straight Line Method (SLM) and Written Down Value Method (WDV). It also covers the distinction between provisions (created for known liabilities) and reserves (created for strengthening financial position or general contingencies). Mastering this chapter is essential for preparing accurate final accounts and scoring high in board examinations.
Start Learning FreeKey Concepts
Depreciation
The permanent, gradual, and continuous decrease in the book value of a fixed asset due to wear and tear, passage of time, or obsolescence.
Straight Line Method (SLM)
A method where a fixed amount of depreciation is charged every year based on the original cost of the asset minus its estimated scrap value.
Written Down Value Method (WDV)
A method where depreciation is calculated at a fixed percentage on the reduced balance (book value) of the asset each subsequent year.
Provision
An amount retained by way of providing for any known liability, the exact amount of which cannot be determined with substantial accuracy (e.g., Provision for Bad Debts).
Reserve
An amount set aside out of profits and other surpluses to strengthen the financial position of the business, which may be general or specific.
Important Formulas
Board Exam Info
Under the Board of Secondary Education, Andhra Pradesh (BSEAP) Class 11 Accountancy syllabus, this chapter typically carries around 8 to 12 marks. Exams frequently feature practical problems on ledger account preparation for machinery under both SLM and WDV methods, alongside short-answer theoretical questions differentiating between provisions and reserves.
Frequently Asked Questions
What is the main difference between Straight Line Method and Written Down Value Method?
In SLM, depreciation is calculated on the original cost every year, whereas in WDV, it is calculated on the reduced book value of the asset each year.
Is depreciation a cash or non-cash expense?
Depreciation is a non-cash expense because it does not involve any actual outflow of cash from the business; it only records the loss in asset value.
Can a provision be created if there is no profit?
Yes, provisions must be created for known liabilities or losses even if the business incurs a net loss, as they are a charge against profits.
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