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P2 C3 Provisions and Reserves — Account STD 11 Commerce — Question

Gujarat BoardEnglish MediumSTD 11 CommerceAccountP2 C3 Provisions and Reserves3 Marks
Question
How the Secret Reserve is created?
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Answer

The Secret Reserve can be created as follows:
$(1)$ By making more provision for depreciation.
$(2)$ By undervaluing the closing stock.
$(3)$ Bymaking more provision for bad debt and contingencies than required.
$(4)$ By recordingcapital expenditure in profit and loss account.
$(5)$ By showing contingent liability asactual liability.
$(6)$ By showing more expenses than actual. Generally secret reserve cannot be created except certain exceptions. This type of reserveis created by the trading units by showing more liabilities or less value of assets.

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