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what is provision what is the difference between provision
& reserve
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Answer Posted / naveen kumar
provision:provision usually means any amount written off or
retained by the way of providing depreciation, renewals or
diminutions in the value of assets or retained by way of
providing for any known liability of which the amount can
not be determined with substantial accuracy.
reserves: that portion of current earnings set aside to
take care of possible future losses or for other specified
purpose.
difference:provision is charge against profits while
reserves is an appropriate of profits.
creation of reserves increase proprietor's fund while
creation of provisions decrease his funds in the business.
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