Question

Difference between reserve and provision

Answer 1

Answer:

Reserve

1. It is created to meet an unknown liability.
2. it is an appropriate of profit.
3. it is shown on the liability side under the head ' reserve and surplus' .

Provision

1. It is created to meet known liability.
2. it is a charge against profit.
3. Either shown on assets side by way of deduction from the particular assets or as a distinct item on the liability side.

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