GK
ACCOUNTING
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Question
[CLICK ON ANY CHOICE TO KNOW THE RIGHT ANSWER]
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By charging excessive depreciation
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By overvaluing stock in trade and goodwill
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By showing a contingent liability as a real liability
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All of the above
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Detailed explanation-1: -By showing excess depreciation on the fixed assets. By undervaluation of current assets. By removing an asset completely from the books of the organisation. By overvaluing liabilities. By treating the income accrued as a liability. More items
Detailed explanation-2: -Difference between the actual value and less value of current assets will create secret reserve. For example, actual value is $ 1000 and you are showing just$ 800. It means, $ 200 value of current asset, you have hidden.
Detailed explanation-3: -Secret reserve is a reserve which generally does not appear in the balance sheet. It is created by increasing the liabilities and decreasing the value of assets.
Detailed explanation-4: -The Correct Answer is-B)-Banking and Financial Companies only.
Detailed explanation-5: -It is also called as “Hidden Reserves or Internal Reserves.” Secret reserves are created by : Excessive depreciation on the asset. Excessive overvaluation of liability.