Class 11 Accountancy - WEST-BENGAL
Depreciation Provisions and Reserves
The chapter 'Depreciation Provisions and Reserves' in Class 11 Accountancy under the WBBSE syllabus covers the systematic allocation of the depreciable amount of an asset over its useful life. Students learn various methods of calculating depreciation, primarily the Straight Line Method (SLM) and the Written Down Value (WDV) method, along with asset disposal accounting. Furthermore, the chapter distinguishes between provisions (created for known liabilities or losses) and reserves (created to strengthen the financial position). Mastery of this chapter is vital for board exams as practical problems carrying 8 to 10 marks are frequently asked in the final examinations.
Start Learning FreeKey Concepts
Depreciation
The permanent, continuous, and gradual 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 depreciation is calculated on the original cost of the asset and remains constant every year throughout its useful life.
Written Down Value (WDV) Method
A method where depreciation is calculated every year on the reduced balance (book value) of the asset, resulting in decreasing depreciation amounts over time.
Provision
A liability or loss of uncertain amount created for a known contingency, such as Provision for Depreciation or Provision for Bad Debts.
Reserve
Amounts set aside out of profits to strengthen the financial position of the business, which can be general or specific.
Important Formulas
Board Exam Info
In the West Bengal Council of Higher Secondary Education (WBBSE) Class 11 annual examination, this chapter typically carries 8 to 12 marks. Questions usually include a 6- or 8-mark numerical problem on ledger accounts of Machinery involving depreciation under SLM or WDV with asset sale/purchase, alongside 1- or 2-mark theoretical questions on differences between provisions and reserves or causes of depreciation.
Frequently Asked Questions
What is the main difference between SLM and WDV methods of depreciation?
In SLM, depreciation is calculated on the original cost and remains equal every year. In WDV, depreciation is calculated on the diminished book value, so the depreciation amount decreases every year.
Are provisions charged against profits or appropriated from profits?
Provisions are a charge against profits, meaning they must be provided even if the business incurs a net loss.
Why is depreciation considered a non-cash expense?
Because it represents the reduction in the value of an asset without any actual outflow of cash from the business.
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