Class 11 Accountancy - RAJASTHAN
Depreciation Provisions and Reserves
This chapter in Class 11 Accountancy for Rajasthan Board (RBSE) introduces students to the systematic allocation of fixed asset costs over their useful lives, known as depreciation. You will learn the causes of depreciation, its distinction from provisions and reserves, and methods to calculate it using the Straight Line Method (SLM) and Diminishing Balance Method. Understanding this chapter is essential for preparing accurate financial statements, as it ensures correct profit calculation and asset valuation. It frequently features practical numerical problems in board exams, making it a high-scoring and crucial topic for your accounting foundation.
Start Learning FreeKey Concepts
Depreciation
The permanent and continuous decrease in the book value of a fixed asset due to use, wear and tear, obsolescence, or effluxion of time.
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 asset account becomes zero at the end of its useful life.
Written Down Value Method (WDV)
A method where depreciation is calculated on the reducing balance (book value) of the asset each year, resulting in decreasing depreciation amounts annually.
Provision
A liability or amount retained by way of providing for any known liability the amount of which cannot be determined with substantial accuracy.
Reserve
Amounts set aside out of profits and other surpluses to strengthen the financial position of the business, which are not meant to cover any known liability.
Important Formulas
Board Exam Info
In the Rajasthan Board (RBSE) Class 11 Accountancy exam, this chapter typically carries around 6 to 8 marks. Questions usually include a mix of short theoretical questions about causes or differences between provisions and reserves, and a major 6-mark practical numerical problem involving the preparation of an Asset Account and Depreciation Account over a period of 2 to 3 years.
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, so the amount decreases each year.
Is depreciation a cash expense?
No, depreciation is a non-cash expense. It does not involve any actual outflow of cash from the business; it only records the loss in asset value.
What is the difference between a provision and a reserve?
A provision is created against a known liability or anticipated loss (like bad debts or depreciation), whereas a reserve is created out of undistributed profits to strengthen the general financial position or for specific future contingencies.
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