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Cheat sheet · Class 11 · CBSE · Commerce Accountancy

Depreciation, Provisions and Reserves cheat sheet

The whole chapter on one page: key formulas, facts and the points to remember, for quick revision before a test.

CBSE Class 11 · Accountancy

Cheat sheet

Chapter 7Depreciation, Provisions and Reserves

SLM — same amount each year; WDV — same rate on a falling balance.

1. Depreciation

Fall in the value of a fixed asset due to use, time, or obsolescence.

SLM=Cost−ScrapUseful life\text{SLM} = \dfrac{\text{Cost} - \text{Scrap}}{\text{Useful life}}

WDV: rate × book value at the start of each year.

2. SLM vs WDV

BasisStraight lineWritten down value
Chargefixed each yearfalls each year
Calculated onoriginal costreducing balance
Book valuecan reach zeronever reaches zero
Suitable forpatents, leasesplant, machinery

3. Recording

  • Charged to asset account: Depreciation Dr, To Asset.
  • Provision method: Depreciation Dr, To Provision for Depreciation.
  • Sale of asset: Asset Disposal A/c shows profit/loss.

4. Provisions & Reserves

Provision

charge against profit for a known liability/loss (doubtful debts).

Reserve

appropriation of profit to strengthen finances.

  • general reserve
  • specific reserve
  • capital reserve
  • secret reserve

5. Key Points

  • Depreciation is a non-cash expense.
  • Land isn't depreciated.
  • Revenue reserve can pay dividends.
  • Capital reserve comes from capital profits.

Remember: SLM vs WDV | provision vs reserve

Depreciation, Provisions and Reserves: questions and notes

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