Question

Give two differences between reserve and provision

Answer 1

Answer:

reverse means if the object goes in the backwards is called reserve provision means when the object go on forward is call provision

Answer 2

Answer:

The major differences between Provision and Reserve are as under:

1. The Provision means to keep some money for a known liability which is probable to arise after a certain time. The Reserve is to retain some money from the profit to for any particular future use.
2. The amount of provision cannot be used to pay off dividends, but the amount of the reserves can be used for so.
3. The creation of a provision is compulsory against the anticipated liability. Conversely, the creation of reserves is voluntary except in the case of Capital Redemption Reserve (CRR), and Debenture Redemption Reserve (DRR).
4. The use of provision is specific, i.e. it must be used for which it is created. On the other hand, reserves can be used otherwise.
5. Provisions are deducted from the concerned asset when it is created against an asset while shown as a liability on the balance sheet when it is created against liability. As opposed to Reserves, which are shown on the liabilities side.
6. It is immaterial for the creation of provision, whether the company earned the profit or not whereas the company must earn the profit for the creation of reserves.