This chapter covers the concepts of depreciation, provisions, and reserves in accounting. Depreciation refers to the gradual decrease in the value of fixed assets over time due to wear and tear, obsolescence, or usage. It is crucial for businesses to account for depreciation accurately to reflect the true value of their assets and to allocate the cost of assets over their useful lives. Provisions are made to account for potential future liabilities or losses that are uncertain but probable, such as bad debts, warranty expenses, or legal claims. Reserves, on the other hand, are funds set aside from profits to strengthen the financial position of the company, mitigate risks, or finance future expansions. Understanding these concepts is essential for proper financial reporting and decision-making.
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Notes Class XI Accountancy Chapter 7 Depreciation, Provisions and Reserves
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This chapter covers the concepts of depreciation, provisions, and reserves in accounting. Depreciation refers to the gradual decrease in the value of fixed assets over time due to wear and tear, obsolescence, or usage.
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