MCQs of Provisions and Reserves Class 11 with Answers
MCQs of Provisions and Reserves Class 11 with Answers for CBSE, ISC and State Boards
Provision is made:
(a) To provide for known losses
(b) To provide for unknown losses
(c) To face the financial difficulties
(d) To strengthen the financial position
Ans – (a)
Creation of provision is:
(a) Voluntary
(b) Illegal
(c) Necessary
(d) Unnecessary
Ans – (c)
Reserves arising from capital receipts are known as
(a) Capital Reserves
(b) Reserve fund
(c) revenue reserves
(d) None of these
Ans – (a)
Provisions are made:
(a) For depreciation on assets
(b) For bad and doubtful debts
(c) For Taxes
(d) All of the above
Ans – (d)
Provisions are
(a) external transactions
(b) internal transactions
(c) both (a) and (b)
(d) None of these
Ans – (b)
Provision __ of the year in which it is created:
(a) Increases the profit
(b) Decreases the profit
(c) Does not effect the profit
(d) May increase or decrease the profit
Ans – (b)
Provisions are necessary for:
(a) To ascertain true profit or loss
(b) To ascertain true financial position
(c) To provide for known losses in the future
(d) All of the above
Ans – (d)
Provision is
(a) an appropriation of profit
(b) charge against Profit
(c) capital expense
(d) None of these
Ans – (b)
Reserve is created:
(a) To strengthen the financial position of the business
(b) To equalise the rate of dividend
(c) To meet the unforeseen liabilities and losses
(d) All of the above
Ans – (d)
Reserve is shown:
(a) In Trading Account
(b) In Profit and Loss Account
(c) In Assets side of Balance Sheet
(d) In Liabilities side of Balance Sheet
Ans – (d)
Which of the following is not a feature of provision?
(a) It is a charge against the profit
(b) It is created for a known liability or expense
(c) It reduces taxable profits
(d) It can be used for dividend distribution.
Ans – (d)
Secret Reserve is created by:
(a) Writing off excessive depreciation
(b) Charging capital expenditure to Profit & Loss Account
(c) Suppressing the sales
(d) All of the above
Ans – (d)
Secret Reserve is shown in:
(a) Profit and Loss Account
(b) Balance Sheet on the assets side
(c) Balance Sheet on the liabilities side
(d) None of the above
Ans – (d)
If the amount of any known liability cannot be determined with substantial accuracy, it is
(a) liability
(b) provision
(c) reserve
(d) None of these
Ans – (b)
Reserve created by undervaluation of closing stock is called:
(a) Secret Reserve
(b) General Reserve
(c) Specific Reserve
(d) Capital Reserve
Ans – (a)
If the amount of any known liability cannot be determined accurately.
(a) Provision should be created
(b) Definite liability should be created
(c) Reserve should be created
(d) Should be shown as a contingent liability
Ans – (a)
Creation of Reserve is:
(a) Illegal
(b) Necessary
(c) Not necessary
(d) Useless
Ans – (c)
Reserve is created from:
(a) Profits
(b) Losses
(c) Assets
(d) Liabilities
Ans – (a)
Which of the following is a correct difference between a provision and reserve?
(a) A provision is created out of legal necessity whereas a reserve is created as a matter of prudence.
(b) A provision is invested whereas reserve is not invested.
(c) 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.
Ans – (a)
Which of the following is a correct distinction between a Revenue reserve and 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 preconditions.
(c) 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.
Ans – (c)
If the amount of any known liability can be determined with substantial accuracy, it is
(a) liability
(b) provision
(c) reserve
(d) None of these
Ans – (a)
Which of the following is not a feature of reserve?
(a) It is an appropriation of profit
(b) It strengthens the financial position of the firm
(c) It has no effect on taxable profits
(d) It cannot be used for dividend distribution
Ans – (d)
Which of the following statements are correct about a “Provisoin”?
(i) Provisions are a charge against the profits of an enterprise
(ii) Provisions are created out of divisible proifts
(iii) Creation of provisions are not necessary for a business
(iv) Provisions are created to meet a known liability
(a) (i), (ii) and (iii)
(b) (ii) and (iv) only
(c) (i), (iii) and (iv)
(d) (i) and (iv) only
Ans – (d)
Which of the following statements is not appropriate in relation to “Provision”?
(a) Provision is a charge against profit
(b) Provision is created for known liability
(c) Provision is created for strengthening the financial position of the business.
(d) Creation of provision satisfies the principle of conservatism.
Ans – (c)
Features of reserves are:
(a) It is created out of divisible profits
(b) They are available for distribution as dividends
(c) Their creation is voluntary
(d) All of the above
Ans – (d)
The arrangement is made for meeting future uncertainties:
(a) Provisions
(b) Reserves
(c) Provisions and Reserves
(d) Investments
Ans – (b)
Which reserve is not shown in the Balance Sheet?
(a) Secret Reserve
(b) Revenue Reserve
(c) Capital Reserve
(d) None of these
Ans – (a)
Reserve is
(a) Part of Provision
(b) An appropriation of profit
(c) A charge against profit
(d) None of these
An – (b)
Reserve is created:
(a) To meet the known losses
(b) To meet the unforeseen losses
(c) To ascertain true profit or loss
(d) To ascertain true financial position
Ans – (b)
Creation of reserves:
(a) Increases the profits
(b) Decreases the profits
(c) Decreases the divisible profits
(d) Increase the divisible profits
Ans – (c)
Which of the following is an example of Revenue Reserve?
(a) General Reserve
(b) Capital Reserve
(c) Workmen Compensation Reserve
(d) None of these
Ans – (a)
Which of the following is an example of Specific Reserve?
(a) Workmen Compensation Reserve
(b) Debenture Redemption Reserve
(c) Dividend Equalisation Reserve
(d) All of these
Ans – (d)
__ is specific reserve:
(a) Investment Fluctuation Fund
(b) Workmen Compensation Fund
(c) Debenture Redemption Reserve
(d) All of the above
Ans – (d)
Profit on sale of assets is used to create:
(a) General Reserve
(b) Specific Reserve
(c) Capital Reserve
(d) All of the above
Ans – (c)
Which of the following is not a feature of Capital Reserve?
(a) It is created out of capital profits
(b) It is used to write off capital losses
(c) it is not purposely created
(d) It is available for distribution as dividend
Ans – (d)
Revenue Reserve is created:
(a) Out of profits on sale of fixed assets
(b) Out of general profits
(c) Out of capital profits
(d) Out of profits on the purchase of a running business
Ans – (b)
Capital Reserve is created:
(a) Out of profits on sale of fixed assets
(b) Out of profits on revaluation of fixed assets
(c) Out of premium received on issue of shares
(d) All of the above
Ans – (d)
