Tag: provisions and reserves
Questions Related to provisions and reserves
__________is reserve created to meet any loss due to natural calamities.
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Revenue reserve
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Capital reserve
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Catastrophic reserve
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None of these
_________ are known as an amount kept aside and retained in the business for future needs.
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Reserves
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Provisions
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Asset
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Liability
Reserves are appropriations against profits, they are created from profits for future applications. Net profit at the end of the year is transferred in specific proportions to Reserves keeping a side this parts of profits.
___________ is created out of revenue profits from business operations.
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Revenue Reserves
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General Reserve
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Reserve Fund
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Dividend equalisation Reserve
Revenue profit means Profit earned in normal course of business and reserve created out of this undistributed profits are called revenue reserves.
____________ is created out of capital profits arising from non operating activities.
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Capital Reserve
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Securities Premium
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Capital Redemption Reserve
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None
The capital reserve is the reserve which is created out of the profits of the company generated from its non-operating activities during a period of time and is retained for the purpose of financing the long term project of the company or write off its capital expenses in future.
Which of the following is not an objective for Reserves?
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Meeting a Future Contingency
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Strengthening the general financial position of the business
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Redeeming a long term liability
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Appreciating asset
Reserves are created to strengthen the business organisation, for contingencies and liquidity. As per accounting principles assets can only be appreciated under re-constitutional conditions.
Which of the following is not an example of reserves?
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General Reserve
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Revenue Reserve
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Dividend Equalization Reserve
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Securities Premium
Reserves are appropriations against profits , they are created from profits for future applications, securities premium is collected when share are issued over its face value hence its not a reserve.
Following are shown under the head Reserves and Surpluses.
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General reserve
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Workmen compensation fund
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Investment fluctuation fund
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All of the above
Creation of reserves ______ the amount of profits available for distribution among the owners of the business.
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Neutralize
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Increase
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Reduces
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None of the above
Reduces.
Whenever any provision is created __________ is debited.
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Profit and loss A/c
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Trading A/c
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Cash A/c
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None of the above
Provisions are created for anticipated losses or towards the expenses which are due and payable.
Reserves are the __________.
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Appropriations of profit
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Appropriations of loss
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Recognition of loss
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All of the above
Reserves are the amounts set aside out of profits. It is an appropriation of profits or accumulated profits to strengthen the financial position of the business. Reserves are not set aside to meet a liability or depreciation in the value of assets but is set aside to meet known or unknown contingency that may arise in future. For e.g., General Reserve, Reserve for Expansion etc.