Related InterviewSolutions

• Making excessive provision for doubtful debts builds up the secret reserves in the business.
• Which of the following is a correct difference between a provision and reserve ?A. A provision is created out of a legal necessity whereas a reserve is created as a matter of pruence.B. A provision is invested whereas reserve is not investedC. A provision is an appropriation of profit whereas a reserve is a charge against profit.D. A provision can be used for distribution of dividend whereas a reserve cannot be allowed to be used for distribution of dividend.
• Given two examples of Specific Reserves.
• Is reserve a charge against profit or an appropriating of profit ?
• Where will you transfer profit on sale of a fixed asset ?
• Which of the following is a correct distinction between a Revenue reserve iand a Capital reserve ?A. A revenue reserve is created out of capital profits whereas a capital reserve is created out of business profits.B. A revenue reserve can be used for distribution of dividend with certain preconditions whereas a capital reserve can be used for distribution of dividend without any preconditionsC. A revenue reserve is created for strengthening the financial position whereas capital reserve is created for meeting capital losses or to be used for purposes specified by the Companies Act.D. There is no distinction between revenue reserve and capital reserve.
• Reserves arising from capital receipts are known asA. Capital Reserve.B. Reserve Fund.C. Any of (a) and (b)D. None of these.
• If the amount of any known liability cannot be determined accurately.A. Provision should be createdB. Definite liability should be createdC. Reserve should be createdD. Should be shown as a contingent liability
• Capital reserves are normally created out of free or distributable profits.
• …………… are created out of capital gains.