Provisions and Reserves — Chapter Summary
NIOS · Class 10 · Accountancy
Summary of Provisions and Reserves for NIOS Class 10 Accountancy. Part of the NIOS Class 10 Accountancy syllabus.
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Overview
Provisions and reserves are two important terms in accountancy, and both involve setting aside amounts from profits. A provision is made for a specific known liability or loss when the exact amount is uncertain, while a reserve is created from profits to strengthen the financial position of the busi
Key Concepts
A provision is an amount set
A provision is an amount set aside out of profits to meet a specific known liability or loss, the exact amount of which cannot be determined with accu
A reserve is the amount set
A reserve is the amount set aside out of profits after charging all expenses and provisions. It is used to strengthen the financial position of the bu
General Reserve is a reserve created
General Reserve is a reserve created without any specific purpose. It is also called Free Reserve and can be used for any future purpose.
Capital Reserve is created out
Capital Reserve is created out of capital profits, not from normal business profits. It cannot be distributed as dividend. It may be used for bonus sh
Secret Reserve is a reserve
Secret Reserve is a reserve that does not appear in the Balance Sheet. It is created by undervaluing assets, overvaluing liabilities, charging capital
Learning Objectives
- To understand the meaning of provision and reserve
- To identify why provisions are created
- To explain the different types of reserves
- To distinguish between provision and reserve
- To understand the uses of capital reserve, revenue reserve, reserve fund, and sinking fund
Frequently Asked Questions
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Sources & Official References
Content is aligned to the official syllabus. Refer to the board website for the latest curriculum.
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