NCERT · Class 11 · Accountancy · Depreciation, Provisions and ReservesWhat is a reserve?
Step-by-Step Solution
A reserve is an amount set aside out of profits and other surpluses to strengthen the financial position of the business.
Detailed Options Breakdown
Option : Charge against profit for a known liability
Incorrect choice. This distractor represents a common misunderstanding of the core principles of Depreciation, Provisions and Reserves.
Option 1: Amount set aside out of profits for future strengthening (Correct Answer)
Correct choice. Refer to the step-by-step verified solution guidelines above for details.
Option 2: An external liability
Incorrect choice. This distractor represents a common misunderstanding of the core principles of Depreciation, Provisions and Reserves.
Option 3: A type of loss
Incorrect choice. This distractor represents a common misunderstanding of the core principles of Depreciation, Provisions and Reserves.
💡 Study Guide: This question tests core syllabus concepts from Depreciation, Provisions and Reserves. For formulas, key summaries, and mock exam reference guides, read the full Depreciation, Provisions and Reserves Revision Notes.