Class 11 Accountancy - TAMILNADU
Depreciation Provisions and Reserves
The chapter 'Depreciation Provisions and Reserves' in Class 11 Accountancy under the Tamil Nadu Samacheer Kalvi syllabus introduces students to the systematic allocation of fixed asset costs over their useful lives. It covers the causes and methods of calculating depreciation, specifically Straight Line Method and Written Down Value Method. Furthermore, the chapter explains the distinction between provisions (created for known liabilities or losses) and reserves (set aside out of profits for general strengthening or specific future goals). Understanding this chapter is essential for correct financial statement preparation and forms a high-scoring component in your board examinations.
Start Learning FreeKey Concepts
Depreciation
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 percentage of the original cost of the asset is charged as depreciation every year, resulting in an equal amount of depreciation 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 diminishing depreciation amounts.
Provision
Amounts set aside out of profits to provide for a known liability or depreciation whose exact amount is uncertain on the balance sheet date.
Reserve
Profits retained in the business to strengthen its financial position or meet unforeseen future contingencies, which can be general or specific.
Important Formulas
Board Exam Info
In Tamil Nadu Samacheer Kalvi Class 11 Accountancy board exams, this chapter typically carries around 10 to 15 marks. Common question types include 1-mark objective questions, short-answer questions differentiating between SLM and WDV or provisions and reserves, and major 10-mark practical problems on ledger accounts like Machinery Account and Depreciation Account.
Frequently Asked Questions
What is the main difference between Straight Line Method and Written Down Value Method?
In the Straight Line Method, depreciation is calculated on the original cost every year, whereas in the Written Down Value Method, it is calculated on the diminishing balance (book value) of the asset.
Are provisions a charge against profits or an appropriation of profits?
Provisions are a charge against profits because they must be provided for regardless of whether the business makes a profit or a loss.
Why is depreciation charged on fixed assets?
Depreciation is charged to correctly ascertain the net profit by matching revenues with expenses, to show true financial position in the balance sheet, and to accumulate funds for asset replacement.
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