Class 11 Accountancy - HARYANA
Depreciation Provisions and Reserves
The chapter 'Depreciation, Provisions and Reserves' in Class 11 Accountancy is vital for understanding how businesses systematically allocate the cost of fixed assets over their useful lives and prepare for future uncertainties. For Haryana (BSEH) board exams, students learn the accounting treatment of depreciation using methods like Straight Line Method (SLM) and Written Down Value (WDV), along with creating asset disposal accounts. It also clarifies the crucial differences between provisions (charges against profit for known liabilities) and reserves (appropriations of profit for strengthening financial position). Mastering this chapter ensures a strong foundation for advanced corporate accounting topics.
Start Learning FreeKey Concepts
Depreciation
The permanent and continuous decrease in the book value of a fixed asset due to use, wear and tear, or obsolescence.
Straight Line Method (SLM)
A method where a fixed amount of depreciation is charged every year on the original cost of the asset.
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 year.
Provision
A liability or amount written off to provide for a known loss or depreciation, created out of revenue profits (charge against profit).
Reserve
An amount set aside out of profits to strengthen the financial position of the business, such as general reserve or capital reserve (appropriation of profit).
Important Formulas
Board Exam Info
In the Haryana (BSEH) Class 11 Accountancy board exams, this chapter typically carries around 8 to 12 marks. Common question types include numerical problems on preparing machinery accounts for 2-3 years using SLM or WDV methods, journal entries for provisions and reserves, and short-answer theoretical questions differentiating between provisions and reserves.
Frequently Asked Questions
What is the difference between Straight Line Method and Written Down Value Method?
In SLM, depreciation is calculated on the original cost and remains constant every year. In WDV, depreciation is calculated on the diminishing balance, meaning the depreciation amount decreases every year.
Are provisions a charge against profit or an appropriation of profit?
Provisions are a charge against profit, meaning they must be provided even if the business incurs a loss, because they relate to a known liability or depreciation.
Is a reserve a liability?
No, a reserve is not a liability. It is a part of undistributed profits set aside by the business to strengthen its financial position or meet future contingencies.
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