conclusion for depreciation provision and reserves
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Depreciation: Depreciation is the loss in the value of Fixed Assets due to normal wear-tear and obsolesce. There are two methods of charging depreciation:
1. Straight Line Method
2. Written-Down Value Method.
Provisions: These are created to meet the known Liability. These are prepared weather there are profits or losses. Provision can not be used for payment of Dividend.
Reserve: These are prepared to meet the unknown liability. It is appropriation of profits. The amount to kept as reserve depend upon on the decision of the management. These can also be used for payment of dividend.
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