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State with reasons whether the following...

State with reasons whether the following statements are True or False ,
(i) Making excessive provision for doubtful debits builds up the secret reserve in the business.
(ii) Capital reserves are normally created out of free or distributable profits.
(iii) Dividend equalisation reserve is an example of general reserve
(iv) General reserve can be used only for some specific purposes.
(v) ‘Provision’ is a charge against profit.
(vi) Reserves are created to meet future expenses or losses the amount of which is not certain.
(vii) Creation of reserve reduces taxable profits of the business.

Text Solution

Verified by Experts

(i) True

(ii) False

(iii) False

(iv) False

(v) True

(vi) False

(vii) False
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Knowledge Check

  • Making excessive provision for doubtful debts builds up the secret reserves in the business.

    A
    False
    B
    True
    C
    Cannot be determined
    D
    Both
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