Reserve and fund - class-XI

The term 'Provision' refers to any of t6the following amounts:

what is Input Tax Credit under GST, how to calculate ITC, how to claim goods is supplied to a taxable person, the GST charged is known as Input Tax.in the return will be credited to electronic credit ledger on the provisional basis. self-assessed tax by taking credit of input available in electronic credit ledger.

Reasons: 
(1) Dividend is the return on share capital from the distributable profits of the company. 
(2) Based on the rate of proposed dividend company is required to transfer a certain percentage to reserves as specified. 
(3) E.g. Dividend of more than 20% of paid up capital entails a minimum of 10% of net profits to be transferred to reserves. 
(4) Company may decide to transfer more than the stipulated rates voluntarily. 
(5) Also, depreciation has to be provided for / from current / previous years profits. 
These provisions help the company to become financially sound and solid. 

 If the bond is called, investors are paid any accrued interest defined within the provision up to the date of recall. The investor will also receive the return of their invested principal. Also, some debt securities have a freely-callable provision. This option allows them to be called at any time.

Section 74 deals with cases where the provisions related to If show cause notice is issued under Section 73 and thereafter the notice makes of issue of notice, no penalty shall be payable and all proceedings in respect of Ans. It is mandatory to pay amount, collected from other person representing tax under this act, 

Because  Whether Section 83 of CGST provides for provisional attachment of any property including bank account of the taxable person during the course o Provisional attachment to protect revenue in certain cases attach provisionally any property belonging to the person on whom notice is .

The Code of Criminal Procedure (CRPC) in India provides the legal framework and procedures that law enforcement must follow when making an arrest.

A  Whether refund of duty paid would be under provisions of  (C) Section 142(3): Every claim for refund filed by any person before, on (D) Section 142(4): Every claim for refund filed after the appointed day for refund of any duty or tax paid under existing law in respect of the goods or services exported 

Discounts allowed to the existing debtors in the next year are debited to the Provision for Discount Account and not to the Profit and loss Account.In other words, the amount of the provision for discount is calculated after deducting bad debts and provision for doubtful debts from sundry debtors.

Depreciation is a non-cash expense. It represents the allocation of the cost of an asset over its useful life and does not involve an actual outflow of cash.

The prudence principle is followed in adopting policy of making provision for doubtful debts @5% on debtors. Prudence principle or conservatism principle means all the expenses or possible losses should be recorded in advance, but incomes should not be recorded in advance. 

A provision is an account which records a present liability of an entity. The recording of the liability in the entity's balance sheet is matched to an appropriate expense account in the entity's income statement.

As against the common belief that provisions are a charge against profit, they can as well be an appropriation out of profits as in the case of proposed dividends. Once a provision is made, the relevant loss or expenditure has to be debited to the provision account.

If any amount of any known liability cannot be determined with substantial accuracy. Provision is a known liability but its amount and due date and indeterminate. 

Under section 142 of the CGST Act, the provision of service must be completed under the new law for certain transitional provisions, or the claim relates to tax paid under the earlier law. Option B is incorrect as a condition for claiming a refund under the specific transitional context.

Provision is a charge against profit, all future expenses and losses which are more probable are provided. As per accrual concept we can make provisions for expenses likely to be incurred but can only record income only after its earned.

Depreciation fund is a reserve, but is a charge against profit since it is created for replacement of an asset. 

As per the golden rules of accounting for nominal account all expenses and losses are debited and all income and gains are credited and for rael account, what comes in debit and what goes out is credit.

There are two method of recording depreciation -

Machinery purchased against the payment through bank is an transaction of purchase of fixed asset. Following entry will be passed in the books of account:

Provisions are created for the anticipated losses/expenses or for probable amount of liability based on certain assumption.

When the depreciation is charged on the asset by creating the provision for depreciation account, in such case the assets are shown in the balance sheet on its original value against which provision for depreciation account is created. 

As per the golden rules of accounting for real account, what comes in debit and what goes out is credit.

Provisions are created for the anticipated losses/expense  or for probable amount of liability based on certain assumption. Following can be stated as provision:

Option A is correct. 

Option A is correct One.

Under provision for depreciation method of recording depreciation, Fixed asset is shown at its original cost on the asset side in balance sheet and depreciation till date is accumulated in provision for depreciatiion account which is shown on liabilities side in balance sheet.

Funds from operations
$=$ Operating Profit $+$ Provision for Dep,
$=$ Rs. $62,400+$ Rs. $10,000$
$=$ Rs. $72,400$.

R.D.D. means reserves for doubtful debts. 

Under provision for depreciation method of recording depreciation, Fixed asset is shown at its original cost on the asset side in balance sheet and depreciation till date is accumulated in provision for depreciatiion account which is shown on liabilities side in balance sheet.

Option A is correct. The provision for doubtful debts is the estimated amount of bad debt that will arise from accounts receivable that have been issued but not yet collected. It is not provision for losses because It is for losses that business may occur but it is not confirmed yet. It is doubtful. Also it is not provision for repayment because business has to receive the amount from debtors. Provision for Doubtful debts are also known as Provision for Bad and doubtful debts. 

A provision for doubtful debts is created to cover the loss of possible bad debts by means of a predetermined percentage of net debtors (i.e.., debtors less bad debts) with a view to bring in a certain element of certainty in the amount of bad debts charged for each accounting period.

When the depreciation is charged by creating accumulated depreciation account, following journal entry is passed:

Depreciation is the permanent and continuous decrease in the book value of a depreciable fixed asset due to use, effluxion of time, obsolescence expiration of legal rights or any other cause. Depreciation does not result in cash out flow. Although, depreciation is a non cash expenditure, it is transfer to profit and loss A/c at the year end.

Depreciation is the permanent and continuous decrease in the book value of a depreciable fixed asset due to use, effluxion of time, obsolescence expiration of legal rights or any other cause. Depreciation does not result in cash out flow. Although, depreciation is a non cash expenditure, it is transfer to profit and loss A/c at the year end.

When the depreciation is charged by creating accumulated depreciation account, following journal entry is passed:

Option B is correct One.
The accumulated depreciation account is an asset account with a credit balance (also known as a contra asset account); this means that it appears on the balance sheet as a reduction from the gross amount of fixed assets reported.

When a provision for depreciation account is maintained, the accumulated depreciation is only moved to the asset account when the asset is sold or disposed of to determine the profit or loss on disposal.

Net working capital  = current assets - current liabilities
Increase in notes payable and increase in creditors will increase current liabilities.
Decrease in provision for taxes and dividends will increase current assets.
Thus change in net working capital = (2500 + 40000) - (28000 + 76500) = -62000
i.e. there is decrease in net working capital by Rs.62,000.

Option B is the correct one.

Currency” includes all currency notes, postal notes, postal orders, money orders, cheques, drafts, traveler's cheques, letters of credit, bills of exchange and promissory notes, credit cards or such other similar instruments, as may be notified by the Reserve Bank.

Currency notes” means and includes cash in the form of coins and banknotes.

Accumulated depreciation a/c is an asset account with a credit balance ( also known as contra asset a/c ) ., this means that it appears on the balance sheet as a reduction from the gross amount of fixed assets reported. So acumulated dep. a/c is a real a/c.

Depreciation is the permanent and continuous decrease in the book value of a depreciable fixed asset due to use, effluxion of time, obsolescence expiration of legal rights or any other cause. Depreciation does not result in cash out flow. It is a non cash expenditure. As per the accounting rules, all incomes and gains and expenses and profits are included in nominal account.

Fixed assets are having its estimated working life too. Hence at the end of its working life or due to any other reasons, assets are being sold. 

Provisions are created against the anticipated losses and the expenses which are due but not paid for. 

The depreciation methods used, the total depreciation for the period for each class of assets, the gross amount of each class of depreciable assets and the related accumulated depreciation are disclosed in the financial statements along with the disclosure of other accounting policies. A change in the method of depreciation is treated as a change in an accounting policy and is disclosed accordingly.

Annual depreciation is the amount of depreciation charged against an asset or group of assets over the course of a financial year. hence, the annual depreciation charge is debited to concerned assets a/c.

The companies act 1956, States that  "Provision usually means any amount Written off or retained by the way of providing depreciation renewal or diminution in the value of assets or retained by the way of providing for any known liability of which the amount cannot be determined with substantial accuracy.

b"A provision is an amount set aside from a company's profit to cover an expected liability  or a decrease in the value of an asset,even though the specific amount might be unknown. A provision  is not a form of saving: instead, it is a recognition of an upcoming liability."

Option D is the correct one.
Any person competent to contract, a company, partnership firm or a
corporation can enter into a Joint Venture in India. It can be in the form of partnership firm, corporation or
any other business entity which the parties may choose. A Joint Venture can be formed for
any lawful business purpose.

A provision is recognized when there is a present obligation from a past event, it is probable that an outflow of resources will be required, and a reliable estimate can be made. All three conditions must be met.

The provision for doubtful
debts is the estimated amount of bad debts that will arise from accounts
receivable that have been issued but not yet collected. It is identical to the
allowance for doubtful accounts. The provision is used under accrual basis accounting,
so that an expense is recognized for probable bad debts as soon as invoices are
issued to customers, rather than waiting several months to find out exactly
which invoices turned out to be noncollectable.

The provision for bad debts might refer to the balance sheet account also known as the Allowance for Bad Debts, Allowance for doubtful accounts, or Allowance for Uncollectible Accounts. In this case, the account Provision for Bad Debts is a  contra asset account (an asset account with a credit balance). It is used along with the account Account receivable in order for the balance sheet to report the net realizable value of the accounts receivable.

Provision for bad debts is made by debiting profit and loss A/c and crediting provision for bad debts account.

Where there is neither partnership deed nor express agreementv or partnership deed is there but silent on any matter, then the relevant provisions of the Indian partnership act, 1932, would be applicale. As per these provisions no interest is to be allowed on capital.

The term provision refers to any of the following amounts :

Option C is the correct one.

Sinking fund method is used when the cost of replacement of an asset is too large. Depreciation is charged every year to the profit and loss A/c. But, it may sometimes happen that the amount is not readily available at the time of purchase of the new asset. 

According to the Diminishing Balance Method, depreciation is charged at a fixed percentage on the book value of the asset. As the book value reduces every year, it is also known as the Reducing Balance Method or Written-down Value Method.

Since the book value reduces every year, hence the amount of depreciation also reduces every year. Under this method, the value of the asset never reduces to zero.

When the amount of depreciation charged under this method and the corresponding period are plotted on a graph it results in a line moving downwards.

This method is based on the assumption that in the earlier years the cost of repairs to the assets is low and hence more amount of depreciation should be charged. Also, in the later years, the cost of repairs will increase and therefore less amount of depreciation shall be provided. 

Hence, this method results in an equal burden on the profit every year during the life of the asset.

However, under this method, if the rate of depreciation applied is not appropriate it may happen that at the end of the useful life of the asset full depreciation is not provided.

Also, while applying this method, the period of use of the asset should be considered. If an asset is used only for 2 months in a year then depreciation will be charged only for 2 months.

The standard journal entry for depreciation is to debit the depreciation expense account (to record the cost) and credit the accumulated depreciation account (to increase the contra-asset).

Accumulated depreciation is a contra-asset account. Since asset accounts have debit balances, their contra-accounts have credit balances.

Provision for depreciation is a common term used to describe the accumulated depreciation account in many accounting frameworks.

When an asset is revalued, the new depreciation charge is based on the revalued amount and the estimated remaining useful life of the asset.

The machine cost 21,000. Depreciation for 2013-14 (11 months) = 21,000 * 0.15 * 11/12 = 2,887.5. WDV = 18,112.5. Depreciation for 2014-15 = 18,112.5 * 0.15 = 2,716.875. WDV = 15,395.6. Depreciation for 2015-16 (5 months) = 15,395.6 * 0.15 * 5/12 = 962.2. Loss = 15,395.6 - 962.2 = 14,433.4. Option C matches these figures.

When using the provision method, depreciation is recorded by debiting the Profit and Loss account (as an expense) and crediting the Provision for Depreciation account.

Land is considered to have an indefinite useful life and does not wear out or become obsolete, so it is not a depreciable asset.

Provision for depreciation is an alternative term used for accumulated depreciation expenses. Depreciation expense is recognized on the income statement as a non-cash expense that reduces the company's net income.

The book value of an asset is calculated by subtracting the accumulated depreciation from the original cost of the asset.

Accumulated depreciation is the total amount of a plant asset's cost that has been allocated to depreciation expense (or to manufacturing overhead) since the asset was put into service.

The basic journal entry for depreciation is to debit the Depreciation Expense account (which appears in the income statement) and credit the Accumulated Depreciation account (which appears in the balance sheet as a contra account that reduces the amount of fixed assets).

Depreciation is a systematic allocation of the cost of an asset over its useful life. It ensures the financial statements show the true financial position by matching expenses to revenue and provides for the eventual replacement of the asset.

An asset can reach full depreciation when its useful life expires or if an impairment charge is incurred against the original cost, though this is less common.  The balance sheet will still reflect the original cost of the asset and the equivalent amount of accumulated depreciation.

Credit balance is the normal balance of an accumulated depreciation account.Accumulated depreciation has a credit balance, because it aggregates the amount of depreciation expense charged against a fixed asset.

Provision for discount on debtors is debited to profit and loss account. Provision for depreciation Discount is allowed when our debtors settle our accounts promptly. The amount of discount is an expected loss and has to be recorded in advance. 

Provision is a known liability but its amount and due date and indeterminate. It is basically setting an amount aside for a probable liability. 

As against the common belief that provisions are a charge against profit, they can as well be an appropriation out of profits as in the case of proposed dividends. ... Once a provision is made, the relevant loss or expenditure has to be debited to the provision account.

The accumulated depreciation account is an asset account with a credit balance (also known as a contra asset account); this means that it appears on the balance sheet as a reduction from the gross amount of fixed assets reported.

Provision relating to accounts are contained in sections 128-137 of the Companies Act, 2013.

Depreciation expense is calculated under sum of year's digit method as: