Read below DK Goel Solutions Class 11 Chapter 17 Provisions and Reserves. These answers have been developed based on the latest Class 11 DK Goel Accountancy book used by commerce stream students issued for current year and the questions given in each chapter.

This chapter presents a piece of deep information about provision, reserves, their types, and differences, as provision and reserves are very important during the entire accounting process in order to display the correct financial position of a company, students have to understand how to create provisions and reserves.

The chapter also contains lot of questions which can be very helpful for Class 11 commerce students of Accountancy and will also help build a strong concepts which will be really helpful in your career.

DK Goel Solutions Class 11 Chapter 17 solutions are free and will help you to prepare for Class 11 Accountancy. Just scroll down and read through the answers provided below

Provisions and Reserves DK Goel Class 11 Accountancy Solutions

Students can refer below for solutions for all questions given in your DK Goel Accountancy Textbook for Class 11 in Chapter 17

Short Answer Questions of DK Goel Solutions Class 11 Chapter 17

Question 1: 

Solution 1: The word ‘Provision’ applies to any of the following numbers, according to the Companies Act:

(i) The balance written down or deferred in order to pay for the depletion, renewal or reduction in the valuation of the properties.

(ii) The amount excluded by means of provision of any known duty for which the amount cannot be calculated with substantial precision.

Below is the value of the provision:-

1.) To ascertain the company’s actual net profit.

2.) To ascertain the company’s real financial status.

3.) In the future, to provide for known losses.

Question 2: 

Solution 2:

Provision	Reserve
To satisfy a known obligation, it is formed.	It is designed to full-fill an unknown duty.
It is created to compensate for a particular loss and should thus only be used to satisfy the loss.	It is not meant to provide for a single malfunction, but it should, for whatever purpose, be used.
It is developed by P&L a/c debiting. Therefore, it is difficult to determine net benefit until all conditions have been debited to P&L a/c.	It is created not by debiting P&L A/c but by appropriation A/c of P&L. As such, after the net profit calculation, it is made.
It is either seen on the side of assets by means of deduction from the asset for which it is generated or on the side of liabilities as a separate object.	It is shown on the liabilities side under the head ‘Reserves and Surplus’.

Question 3: 

Solution 3:

Basis of Difference	Provision	Reserve
(i) Basic Nature	To satisfy a known obligation, it is formed.	It is formed to satisfy an undisclosed liability.
(ii) Purpose	It is created to compensate for a particular loss and should thus only be used to satisfy the loss.	It is not intended to provide for a particular failure, so it can be used for any reason.
(iii) Effect on Taxable Profits	It is developed by P&L a/c debiting. Therefore, it is difficult to determine net benefit until all conditions have been debited to P&L a/c.	It is created not by debiting P&L A/c but by appropriation A/c of P&L. As such, after the net profit calculation, it is made.
(iv) Presentation in Balance Sheet	It is either seen on the side of assets by means of deduction from the asset for which it is generated or on the side of liabilities as a separate object.	It is seen under the heading ‘Reserves and Surplus’ on the hand of liabilities.
(v) Element of Compulsion	The aim is to pay for depreciation, loans that are uncertain and other particular liabilities.	The goal of the reserves is to improve the company’s financial status.
(vi) Use for payment of dividend.	It cannot be used by owners as dividends for shareholders.	It may be used by shareholders as dividends for delivery.

Question 4:

Solution 4:

(i) Appropriation or Charge:- Creation of provision is a legal necessity. Provisions have to be provided for even if there are no profits. Thus, provision is charge against profits. Creation of reserves is discretionary. It can be created only if adequate profits have been earned. Thus reserve is an Appropriation of Profit.

(ii) Financial Position:- It is either shown on the assets side by way of deduction from the asset for which it is created or as a distinct item on the liabilities side. It is shown on the liabilities side under the head ‘Reserves and Surplus’.

(iii) Distribution:- It cannot be utilised for distribution as dividends among shareholders. It can be utilised for distribution as dividends among shareholders.

Question 5: 

Solution 5: The five examples of Capital Reserve are:-

1.) Gain from fixed asset transactions.

2.) Benefit from the fixed-asset and liability revolution.

3.) Rates obtained in respect of the issue of shares or debentures.

4.) Profit from the purchases of a company that is going.

5.) Benefit due to a company’s incorporation.

Question 6: 

Solution 6:

Revenue Reserves	Capital Reserves
This funds are generated from sales profits that result from the company’s regular operational operations that are otherwise eligible for dividend payment.	This reserves are generated from capital gains and do not result from the company’s regular operational operations and are not eligible for dividend payment.
Only for the intended purpose may a particular reserve be used, whereas a general reserve can include the payment of dividends to shareholders without any preconditions.	These reserves may not usually be used for the payment of dividends to shareholders. Nevertheless, others used to distribute dividends according to compliance with those requirements set down by corporations.

Question 7: 

Solution 7: In addition to the usual earnings, capital gains are received from multiple sources in the sector as well. Capital Reserves are regarded as the reserves generated by those capital gains.

The five Capital Reserve examples are below:—

1.) Gain from fixed asset transactions.

2.) Benefit from the fixed-asset and liability revolution.

Question 8:

Solution 8: It is possible to build secret reserves in the following ways:

1.) Write off unfair depreciation

2.) Charging the Benefit and Loss Account for capital spending (such as adjustment of assets).

3.) Treating a receipt of revenue as a receipt of money (such as rent received credited to Building Account)

Very Short Answer Questions of Provisions and Reserves

Question 1:

Solution 1: The term ‘Provision’ applies to the amount written off or retained by paying for depreciation, renewals or reduction in asset value, according to the Companies Act.

Question 2: 

Solution 2: The examples of provisions are:-

1.) Provision for Depreciation of Assets

2.) Provision for Taxation.

Question 3: 

Solution 3: To face potential risks, savings mean the balance put aside from benefit and other surpluses. In other words, a reserve is planned for potential execution of some uncertain obligation or failure.

Question 4: 

Solution 4: The examples of reserves are:-

1.) General Reserve

2.) Capital Reserve

Question 5: 

Solution 5:

Basis of Difference	Provision	Reserve
(i) Basic Nature	To satisfy a known obligation, it is formed.	It is formed to satisfy an undisclosed liability.
(ii) Purpose	It is created to compensate for a particular loss and should thus only be used to satisfy the loss.	It is not intended to provide for a particular failure, so it can be used for any reason.

Question 6: 

Solution 6: Reserve is a tax appropriation, whereas provision is a move toward profit.

Question 7: 

Solution 7: Example for Provision:- Provision for Depreciation of Assets.

Example for Reserve:- General Reserve

Question 8: 

Solution 8: In order to ensure a steady dividend rate, a divided equalisation reserve is established. A percentage of the surplus is allocated to the reserve in the year in which the earnings are adequate and is used to hold the dividend up for the year in which the profit is insufficient.

Question 9: 

Solution 9: In the event of an incident that is unexpected or unknown, this fund was developed to pay costs owing to workers.

Question 10:

Solution 10: Below are the two examples of specific reserves:-

(i) Divide Equalisation Reserve

(ii) Workmen Compensation Fund

Question 11: 

Solution 11: In addition to the normal profits, capital gains are often earned in the sector from various sources. The reserves of capital are known to be the reserves produced by such capital gains.

Question 12: 

Solution 12: General Reserve:- The businessman does not withdraw the full profit from the company in order to meet uncertain future and obstacles, but maintains a portion of it in the firm.

Specific Reserve:- It is created with a specific goal and can only be used for that purpose.

Question 13: 

Solution 13: In the payment of dividends, we will use the Tax Reserve.

Question 14: 

Solution 14: The income from the disposal of a financial asset that may then be applied to the Capital Reserve is a capital gain.