Class 11 Accountancy - KERALA
Depreciation Provisions and Reserves
The chapter 'Depreciation Provisions and Reserves' in Class 11 Accountancy under the Kerala SCERT syllabus introduces students to the systematic allocation of the cost of fixed assets over their useful lives. You will learn the fundamental causes of depreciation, various methods of calculating it—specifically the Straight Line Method (SLM) and Written Down Value (WDV) method—and how to pass journal entries and prepare ledger accounts. Additionally, the chapter covers the creation of provisions and reserves to strengthen a business's financial position. Mastering this chapter is crucial for board exams as practical problems on asset accounts and depreciation carry significant weight.
Start Learning FreeKey Concepts
Depreciation
The permanent, gradual, and continuous decrease in the book value of a fixed asset due to wear and tear, lapse of time, obsolescence, or usage.
Straight Line Method (SLM)
A method where a fixed percentage of the original cost of the asset is written off every year so that the amount of depreciation remains equal annually.
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, resulting in decreasing depreciation amounts over time.
Provision
A liability or 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 Doubtful Debts).
Reserve
Amounts 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 Kerala SCERT Class 11 Accountancy board examinations, this chapter typically carries around 8 to 12 marks. Questions commonly include 8-mark or 6-mark practical problems involving the preparation of Asset Accounts and Depreciation Accounts under both SLM and WDV methods, along with short-answer questions differentiating between provisions and reserves or explaining causes of depreciation.
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 balance (book value), so the depreciation amount decreases each year.
Why is depreciation charged on fixed assets?
Depreciation is charged to match the cost of the asset with the revenue it generates in each accounting period (Matching Principle) and to show the true and fair value of assets in the balance sheet.
What is the difference between a provision and a reserve?
A provision is created for a known liability or anticipated loss of uncertain amount, whereas a reserve is created out of profits to strengthen the general financial stability or for future unknown contingencies.
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