CBSE Class 11 Accountancy Revision Notes Chapter 7

CBSE Class 11 Accountancy Revision Notes Chapter-7 – Depreciation, Provisions, and Reserves

Accountancy is one of the major subjects for Commerce students of Class 11. The concepts built in this grade will help students not only with their further studies but also with their careers. So it is important that students go through the chapters thoroughly and build a strong foundation in this subject.

To help students with this, Extramarks offers CBSE Class 11 Accountancy Revision Notes for Chapter 7 – Depreciation, Provisions, and Reserves. These notes cover all the important topics taught in this chapter in a clear and concise manner. Students can use these notes to prepare for their exams efficiently and also as last-minute revision material just before their exams. These notes can be accessed any time from the Extramarks’ website 

Revision Notes for CBSE Class 11 Accountancy Chapter 7 – Download

Access Class-11 Accountancy Chapter 7 – Depreciation, Provisions, and Reserves Notes

Depreciation Meaning: 

The reduction in the book value of a depreciable asset due to constant use, wear and tear, and expiry of the asset’s estimated useful life is referred to as depreciation.

Causes of Depreciation:

• Constant use
• Expiry of the estimated lifetime of the asset
• Accident
• Depletion
• Permanent decrease in the market price

Importance of Providing Depreciation:

• For determining actual profit or loss
• For a true status of the financial position
• To identify the actual cost of the product
• To offer funds for the replacement of the asset
• To avoid excess payment of income tax 

Factors that determine the amount of Depreciation:

• The total cost of the asset
• Estimated scrap value 
• The estimated useful life of the asset

Methods of Allocating Depreciation:

• Straight-line method
• Written down value method
• Annuity method
• Depreciation fund method 
• Insurance policy method 
• Revaluation method 
• Depletion method 
• Machine hour rate method

Straight-Line Method:

In this method, depreciation is charged at a fixed percentage of the asset’s original cost. The amount of depreciation remains equal from year to year, and this method is also referred to as the ‘ Equal instalment method’.

Written Down Value Method:

In this method, the value of assets goes on decreasing year after year, and the amount of depreciation charged also goes on declining every year. For a detailed understanding of all the methods of allocating depreciation, students can refer to the Revision Notes of this chapter offered by Extramarks.

Provision:

An amount that is kept aside to cover a known future liability or expense is a provision. This amount is kept aside by mostly all the organisations or companies as coverage for any anticipated loss.

Example

• Provision for bad debt
• Provision for depreciation
• Provision for discount on debtors

Reserves:

An amount that is kept aside to cover an unknown liability or expense in the future is referred to as a reserve. Reserves are created to strengthen the financial position of the business.

Types of Reserves:

There are mainly two types of reserves:

• Revenue reserve
• Capital reserve

Revenue Reserve: Reserves that come into existence from the profit earned through the day-to-day business operations.

• General Reserves: Profit that is retained for uncertainties
• Specific Reserves: Reserves created for a specific purpose

Capital Reserves: These are created to issue full bonuses among the equity shareholders and write off capital losses.

Example

• Profit on the sale of assets
• Profit on the redemption of the debenture

Depreciation Provisions and Reserves Notes

Many students struggle to find the right study material that summarises all the concepts covered in their NCERT textbook chapters accurately and comprehensively. Extramarks aspires to bridge this gap by providing Revision Notes for all chapters of their Accounting textbook.

The notes provided for Chapter 7 of Class 11 work as a quick guide for the efficient preparation of the chapter. These notes cover all the important topics in a simple and easy-to-understand language. The notes also provide thorough examples and explanations so that commerce students are able to understand accounting concepts practically.

These notes can be the perfect tool for students who want to score well in their finals and also want to understand each topic of the chapter in-depth. These are made available in an online format that can be downloaded to your digital device and utilised afterwards.

Notes of Depreciation Class 11

The Notes of Class 11 Accountancy Chapter 7 are a kind of revision manual that eases the process of answering questions and also allows students to understand the concept clearly. 

Depreciation Class 11 Notes —Depreciation

The notes get started with a brief introduction to the concept of depreciation. It also discusses its features, causes, objectives, and needs. 

Depreciation Class 11 Notes—Methods of Calculating Depreciation

Once the definition is clear, the notes then move towards discussing the various depreciation methods. The two methods are the written down value method and the straight-line method. Sufficient examples have been provided in the notes to explain these two methods.

Depreciation Class 11 Notes—Provisions and Reserves 

Provision and reserves are the next terms that are discussed in the notes. These two topics have been discussed to explain the basics of both of these. There are two kinds of reserves, and the differences between both types have been explained very well. These notes also discuss the difference between revenue reserve and capital reserve.

Why Should Students Use Depreciation Class 11 Notes?

There are various reasons students should use Chapter 7 Accountancy Class 11 Notes. Let’s discuss a few of those.

• With these notes, students do not need to prepare study notes themselves. Instead, they can utilise that time in practising other topics or subjects.
• These notes help students understand the subject and its concepts in a deeper way.
• Accountancy notes are available easily on the official website or app of Extramarks.
• These notes make the chapter easier to understand, and thus students can score good marks in their exams.0