How Secret reserve is created? A secret reserve is created by the following methods:

1. By under valuation of assets much below their cost or market value, such as investment, stock in trade, etc. 2. By not writing up the value of an asset, the price of which has permanently gone up. 3. By creating excessive reserve for bad and doubtful debts or discount on sundry debtors. 4. By providing, excessive depreciation on fixed assets. 5. By writing down goodwill to a nominal value. 6. By omitting some of the assets altogether from balance sheet. 7. By changing capital expenditure to revenue account and thus showing the value of assets to be less than their actual value. 8. By overvaluing the liabilities. 9. By the inclusion of fictitious liabilities. 10. By showing contingent liabilities as actual liabilities.