Tag: provisions and reserves

Questions Related to provisions and reserves

Creation of reserve reduces taxable profits of the business.

elements of accounts company final accounts reserves provisions provisions and reserves

  1. True

  2. False

Show answer
Correct Option: B
Explanation:

Since reserves are neither expenses nor losses, so these are not charged to profit & loss Account rather these are debited to Profit & Loss Appropriation Account which is prepared after Profit and Loss Account.

Creation of reserve does not reduce the net profit but only reduces the divisible profits.