Class 11 Accountancy - Chapter Depreciation, Provisions and Reserves NCERT Solutions | Explain the concept of ‘secret res

Welcome to the NCERT Solutions for Class 11th Accountancy - Chapter Depreciation, Provisions and Reserves. This page offers a step-by-step solution to the specific question from Exercise 1, Question 13: explain the concept of lsquo secret reserve rsquo....
Question 13

Explain the concept of ‘secret reserve’.

Answer

Secret reserve is the amount by which the assets of an organization are understated or its liabilities are overstated. An entity might establish a secret reserve for competitive reasons, to hide from other businesses that it is in a better financial position than appears in its financial statements.

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