Write the meaning of reserve
and provision. [HSEB 2065]
Reserve: A
reserve is a part of the profit set aside to meet future contingencies and
losses. It is separated out of the profit for meeting unexpected future
liabilities and losses or strengthening the financial position of the business.
Provision: An
amount which is created for meeting a known loss or liability is known as
provision. It is charged against profit and loss account. It reduces the amount
of net profit.
Mention any four objectives of
reserve. [HSEB 2067]
The
main objectives of creating reserve are as follows:
- To meet unexpected future losses, liabilities and contingencies.
- To strengthen the financial position of the business.
- To redeem debenture, preference shares and other loans and liabilities.
- To declare and distribute the uniform rate of dividend over years.
Give
any four examples of provision [HSEB 2064]
The following
are the main examples of provision
Provision
for doubtful debts
Provision
for discount on debtors
Provision
for taxation
Provision
for dividend.
ConversionConversion EmoticonEmoticon