Class 11 Accountancy - BIHAR
Depreciation Provisions and Reserves
The chapter 'Depreciation Provisions and Reserves' in Class 11 Accountancy is vital for understanding how businesses account for the reduction in asset values over time and manage future uncertainties. For Bihar (BSEB) board students, this chapter lays the foundational mechanics of asset management, covering methods of calculating depreciation like Straight Line Method (SLM) and Diminishing Balance Method, alongside creating specific reserves and provisions. Mastery of this chapter is crucial as it frequently features practical numerical problems and theoretical questions in annual board exams, directly impacting your overall scoring potential.
Start Learning FreeKey Concepts
Depreciation
The permanent, continuous, and gradual decrease in the book value of a fixed asset due to use, wear and tear, or obsolescence.
Straight Line Method (SLM)
A depreciation method where a fixed percentage of the original cost of the asset is charged every year as depreciation.
Written Down Value (WDV) Method
A method where depreciation is calculated on the reduced balance (book value) of the asset each year rather than its original cost.
Provision
A liability or amount retained to provide for a known liability whose exact amount is uncertain on the balance sheet date, such as provision for doubtful debts.
Reserve
An amount set aside out of profits and other surpluses to strengthen the financial position of the business, which can be general or specific.
Important Formulas
Board Exam Info
In the Bihar (BSEB) Class 11 Accountancy board examinations, this chapter typically carries around 8 to 12 marks. Questions usually include 1 or 2 objective/short-answer questions on definitions and a major 6-mark practical numerical problem requiring the preparation of Asset Account and Depreciation Account for 2 to 3 years.
Frequently Asked Questions
What is the difference between depreciation and fluctuation?
Depreciation is the gradual decrease in the book value of fixed assets due to use or time, whereas fluctuation refers to the rise or fall in the market price of assets.
Why is depreciation treated as a non-cash expense?
Because it represents the loss in the value of an asset without any actual outflow of cash from the business.
What is the main difference between a provision and a reserve?
A provision is created against a known liability or anticipated loss of uncertain amount, while a reserve is created out of profits to strengthen the financial position or meet future unknown contingencies.
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