Secret Reserves: Advantages and Disadvantages

 Q. What are Secret Reserves? Give their advantages and disadvantages. 

Ans. MEANING OF SECRET RESERVES: A Secret reserve is one which is not disclosed by the Balance Sheet. These reserves are created by showing profit at figure much lower than actual and by showing the assets at a lower figure and liabilities at a higher figure. When secret reserves exist, the actual position of the firm is much better than what is disclosed by the Balance Sheet.

Secret reserves may be created in the following ways:

(i) Writing off excessive depreciation;

(ii) Charging Capital expenditure (such as addition to assets) to Profit & Loss Account.

(iii) Treating a revenue receipt as a capital receipt (such as rent received credited to building account)

(iv) Undervaluation of assets (such as undervaluation of closing stock)

(v) Showing an actual asset as a contingent asset;

(vi) Showing a contingent liability as an actual liability;

(vii) Suppressing the sales;

(viii) Creating excessive or unnecessary provision for doubtful debts and other contingencies.

ADVANTAGES OF SECRET RESERVES: 

(i) Financial Stability: Creation of secret reserves strengthens the financial position of the enterprise without disclosing this fact to the shareholders or the public.

(ii) Helpful in Absorbing Unforeseen Losses: The presence of secret reserves enable such concerns to absorb any unexpected losses with any public discomfiture.

(iii) Regularity of dividends: Such reserves help the enterprise in maintaining the rate of dividend during the adverse trading conditions without disclosing this fact to shareholders or the public.

(iv) Avoidance of Competition: Because of concealment of actual profitability of the enterprise, the entry of the competing firms in the particular line of business is avoided.

DISADVANTAGES OF SECRET RESERVES:

(i) Unfair Presentation of Financial Statements: Statement of Profit & Loss fails to disclose true profit and the Balance Sheet fails to disclose a true and fair view of the financial position of the enterprise.

(ii) Loss to Shareholders: Shareholders who wish to sell their shares may not get actual price of their shares because of understatement of profits and financial position of the enterprise.

(iii) Misuse by Management: Fraudulent management may take undue advantage by creating secret reserves. Profits may be suppressed to enable them to buy the shares of the company at a lower price and then the profits may be enhanced by eliminating the secret reserves to enable them to sell the shares at a higher price.

(iv) Cover for Misdeeds of Management: Secret reserves may be utilised by management to cover their mistakes or misleads. 

The creation of secret reserves is not allowed under the Companies Act, 1956 as it requires a full disclosure of all material facts and significant accounting policies followed in preparing financial statements.

secret reserves: advantages and disadvantages

Celebrities makes a very good living out of media attention and have chosen to live in the public spotlight. They have no right to complain when they feel the media is intruding their privacy. To what extent do you agree or disagree?

Q. Celebrities makes a very good living out of media attention and have chosen to live in the public spotlight. They have no right to complain when they feel the media is intruding their privacy. To what extent do you agree or disagree?

Everything in life comes with a cost. It may not always be in terms of money but in the sense of struggle and hard work. A grand lifestyle, limelight, stardom, crazy fans could be the dream of many but it results in the absolute loss of privacy. Stars are under the constant eye of the media, spying every move they make and turning it into news. Some people feel that celebrities have no right to raise an objection on the media intruding their privacy. I do not agree to this and elaborate the same in my writing.

To embark on, there are umpteen reasons to support my disagreement. First of all, celebrities are also humans like others who have worked hard to reach a level of popularity and this does not give the media a right to invade their privacy. For example, recently a website posted some pictures of a Bollywood superstar, Shahrukh Khan’s daughter with her friend. I find that this was as natural a thing and did not require being hyped by the media because as all other teenagers, she too had a friend. Such meaningless and useless interference is not needed and also the media should be kind enough to spare certain aspects of life as personal and meant to become a public headline.

Furthermore, we live in a country where the rights for all citizens are equal and if others can complain against or speak for their grievances then why should the stars be an exception to it? Everyone has the right to choose any profession and wear or eat what they want but media should not make everything public because they are public figures. Besides, increasing the viewers for a channel or the sales of a newspaper or magazine by making the life of stars a public affair and making it for granted that they will at all times be happy to gain popularity no matter what the reason, is a wrong notion that the media should get rid of.

To conclude, I would like to say that stars have all rights to complain whenever and wherever they feel there is an encroachment in their personal life and the media should be sensible to realise and draw a line of demarcation between personal and public life.

POINTS TO REMEMBER:

Everything in life comes with struggle and hard work. // Stars have worked really hard to achieve fame. // They should have every right to complain if they feel that media invades their privacy. // Their family affairs, are not meant to be discussed in public. // Their hard work and effort should be paid in the form of popularity and fan following. // Privacy is an aspect that no individual can afford to lose and celebrities are no exception to it.

VOCABULARY:

Intruding: invading, attacking // Umpteen: several // Grievances: complaints // Popularity: publicity // Encroachment: intrusion

The best way to improve health is to exercise.

 Q. The best way to improve health is to exercise daily. To what extent do you agree or disagree to this statement?

A man’s most-prized possession is his health. It is rightly said, “Health is Wealth”. There is practically nothing one can do if one’s health does not permit. That is why, people are becoming increasingly conscious about their health and ways of improving it. It is believed that the best method to be healthy is to develop a regular workout routine. I agree with this statement and will shed light on my views in the following paragraphs.

There are several reasons why I believe that exercise is the best out of all methods to maintain a good health. The major reason to support my stand is that a regular fitness regime boosts our energy and strength and makes an individual feel fresh for long durations which increases productivity and efficiency. Another benefit of exercise is that it is a natural preventive measure of diseases like cardiovascular issues, metabolic syndrome, depression, certain types of cancer, arthritis etcetera. During workout, our body releases chemicals called endorphins which uplift our mood and make us feel happy and stress-free. Along with all the health benefits regular exercise also strengthens our confidence and self-respect.

Furthermore, it helps to control weight and as compared to dieting, it is a better option of losing those extra kilos. We do not need to indulge in extreme and relentless work out schedules. Simple routine of exercise can do wonders to keep us fit as a fiddle. Exercise helps to prevent memory loss and dementia. In addiction to this, research shows that engaging in daily exercise boosts our creativity and life span.

To conclude, I would like to say that exercise is the most appropriate choice to keep fit as it adds years to your life and life to your years. Therefore, everyone should opt a healthy routine of exercise to maintain a healthy body and mind.

POINTS TO REMEMBER:

Daily exercise is the best choice to be healthy.  // Health is wealth. // Advantages of regular exercise are reduced stress, more productivity, longer life, enhanced creativity. // Also, controlled weight, prevention of memory loss, improved confidence and self-esteem.

VOCABULARY: Regime: routine // dementia: madness // engaging: involving // prevented: controlled

RELATED QUESTION: In this modern era, due to sedentary lifestyle every individual must find time to exercise daily. What are the benefits of exercising regularly?

Shopping replacing other hobbies

 Q. In a very busy routine, shopping is replacing other hobbies. What are the reasons for this? Is it a positive or negative development? Give your views.

In the modern epoch of materialism and competition, shopping has become an unavoidable time passing activity for most people and consequently less attention is paid to other hobbies like painting, stamp collection etcetera. Now, people prefer to go shopping or just window shopping during free time. There are several reasons for such a trend and I believe, it is a positive as well as negative development. I will cast light on this in the following writing.

To begin, there are numerous factors due to which people choose shopping as a leisure time activity. The first reason can be the changing lifestyle of people. Unlike past, when people bought only the necessities, presently, people buy goods to show off and pamper themselves and they are tempted to do so by powerful advertisements. Also, in earlier times, life was simple but nowadays, people are more conscious socially and careful about the way they dress up due to which they frequently need to shop clothes, etcetera to fit in the modern society.

Further, I think shopping has positive effects, for example, it works as a mood elevator. When people feel low or depressed, they feel happy after shopping. Also, consumers play a key role in a nation’s economy. The growth of a country’s economy has a lot of dependency on purchasing power and frequency of purchase by consumers and if shopping reduces, then the country’s financial status is deemed to be in trouble.

On the other hand, there are certain undesirable results brought by this development. The major drawback is that people spend a lot of money in buying unnecessary goods. Many a times, people end up denting their hard earned savings to buy expensive goods which are not really required. In addition, the mental and physical functioning required in this activity is very limited which may lead to physical illness. Also, most shoppers become materialistic and are inclined to brand names and signature items regardless of price and need.

Overall, shopping being opted as a leisure time activity in place of other hobbies has some good effects, however, it must be done within certain limits to avoid the negative effects. 

POINTS TO REMEMBER:

Shopping is opted as a leisure time activity // Reasons are materialism, competition, helps in elevating the mood. // The positive aspects are it can boost the economy and make people happy. // Demerits- it leads to wastage, not helpful in mental development // Advisable to be done only in limits.

VOCABULARY: Epoch: era // advisable: suggested // drawbacks: demerits, disadvantages // merits: benefits, advantages

RELATED QUESTION: Shopping is the favourite activity of people nowadays. Do its advantages overshadow its disadvantages?

Shopping is replacing other hobbies