Class 11 Accountancy - KARNATAKA
Depreciation Provisions and Reserves
The chapter 'Depreciation Provisions and Reserves' in Class 11 Accountancy for Karnataka (KSEEB) students introduces the systematic allocation of fixed asset costs over their useful lives. It covers the core concept of depreciation, its causes, and methods of calculation like Straight Line Method (SLM) and Written Down Value (WDV) method. Students also learn 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 is a high-scoring area in board exams.
Start Learning FreeKey Concepts
Depreciation
It is the permanent, gradual, and continuous decrease in the book value of a fixed asset due to wear and tear, efflux of time, 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 every year on the reduced balance (book value) of the asset rather than the original cost.
Provision
Amount retained out of profits to provide for a known liability or loss, the exact amount of which is uncertain on the balance sheet date.
Reserve
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 Karnataka (KSEEB) Class 11 Accountancy board exams, this chapter typically carries around 10 to 12 marks. Common question types include 1-mark objective questions, 5-mark short notes differentiating between provisions and reserves or SLM and WDV, and a major 12-mark practical numerical problem on asset and depreciation accounts.
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 and remains constant every year. In WDV, depreciation is calculated on the diminishing book value, resulting in a reducing depreciation amount each year.
Are provisions a charge against profit or an appropriation of profit?
Provisions are a charge against profits because they must be provided even if the business incurs a loss, as they relate to known liabilities or depreciation.
Why is depreciation charged on fixed assets?
Depreciation is charged to follow the matching principle of accounting, ensuring that the cost of the asset is matched against the revenue it helps generate over its useful life.
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