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WHAT IS THE DIFFERENCE BITWEEN RESERVE & PROVISION?
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Answer Posted / imran khan
Provisions are those where the liability existance is
certain, but the amount of liability cannot be determined
with substantial accuracy.
In case of reserves, the liability is not known. but some
amount of profits are kept aside for meeting the
contingencies that might become actual liabilities.The main
difference is a provision always made for meeting
some specific contingencies,like provision for depreciation
etc.But reserves is a part of profit it setaside out of the
net profits earned,and it dont have any special purposes
usually.
But in some cases the there is a restriction regarding the
use of reserves.
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