Provisions and Reserves

What is the purpose of making excessive provision for doubtful debts?

• To build up the secret reserve in the business

• To reduce taxable profits of the business

• To meet future expenses or losses

• To charge against profit

How are capital reserves normally created?

• Out of free or distributable profits

• By charging against profit

• To meet future expenses or losses

• To reduce taxable profits of the business

Which type of reserve is the dividend equalisation reserve?

• General reserve

• Specific reserve

• Capital reserve

• Secret reserve

Can general reserve be used for specific purposes?

• Yes

• No

• Depends on the business

• Not mentioned in the text

What is a provision?

• A charge against profit

• A reserve created for future expenses

• A decline in the value of assets

• A part of acquisition cost

What is the purpose of creating reserves?

• To build up the secret reserve in the business

• To reduce taxable profits of the business

• To meet future expenses or losses

• To charge against profit

Does the creation of reserves reduce taxable profits of the business?

• Yes

• No

• Depends on the type of reserve

• Not mentioned in the text

What is the decline in the value of assets called?

• Depreciation

• Provision

• Reserve

• Acquisition cost

What are installation, freight, and transport expenses a part of?

• Acquisition cost

• Depreciation

• Provision

• Reserve

What is a reserve created for maintaining a stable rate of dividend called?

• Dividend equalisation fund

• General reserve

• Specific reserve

• Secret reserve