Provisions and Reserves Quiz-2

What does the term 'Provision' refer to according to the Companies Act?

• An amount retained for employee bonuses

• An amount set aside for future investments

• An amount written off for depreciation or known liabilities

• An amount distributed as dividends

Which of the following is NOT an example of a Provision?

• Provision for Bad Debts

• Provision for Taxation

• Provision for Capital Gains

• Provision for Repairs

Naira is managing a fund for her startup. What is the primary purpose of creating Provisions?

• To invest in new projects

• To distribute dividends

• To meet known liabilities

• To increase profits

Which of the following is a feature of Reserves?

• Created out of net profits

• Created to meet known liabilities

• Must be legally mandated

• Always distributed as dividends

What is the main difference between Provisions and Reserves?

• Provisions are for known liabilities, Reserves are for unknown liabilities

• Provisions are created from capital profits, Reserves from revenue profits

• Provisions can be distributed, Reserves cannot

• Provisions are shown on the assets side, Reserves on the liabilities side

Asher is planning to set aside funds for a specific project. Which type of Reserve is created for a specific purpose?

• Revenue Reserve

• Capital Reserve

• Specific Reserve

• General Reserve

What is a Secret Reserve?

• A reserve that is publicly disclosed

• A reserve that is mandatory by law

• A reserve created to meet known liabilities

• A reserve not disclosed in the Balance Sheet

Which of the following is an advantage of Secret Reserves?

• Higher dividends for shareholders

• Increased competition in the market

• Transparency in financial statements

• Financial stability without public knowledge

What is the purpose of a Debenture Redemption Reserve?

• To invest in new assets

• To provide funds for the redemption of debentures

• To pay dividends to shareholders

• To cover operational losses

Which of the following is a type of Capital Reserve?

• Profit on sale of fixed assets

• Dividend Equalization Reserve

• General Reserve

• Workmen Compensation Reserve