what is a difference b/w provision and reserve
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Answer / venkatesh
provision and reserves are maintained under the profit and
loss account only.the main differance bet ween the
provision and reserves are
provision:
Provision is created out of profits for the perticular
purpose of exependiture only.
ex:provision for income tax and provision for depreciation
etc...
Reserves:
Reserves are maintained for the purpose of future
obligations.Those reserves are also different types.
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Answer / sandheep
Provision is a present obligation of a company from past
event. It is created for a known expense and its treatment
is charging in P/L. Reserve is created for an unknown
expense and it is an appropriation of profit.
| Is This Answer Correct ? | 3 Yes | 1 No |
Answer / aneesh nair
Reserves are appropriations of profit namely when profits have been ascertained after deducting all expenses which includes provision and others. Reserves are residual earnings after all expenses and taxation which belongs to the owners namely the shareholders.
There are essentially two(2) types of Reserves:
Capital Reserves
Revenue Reserves
Provisions are those where the liability existance is certain, but the amount of liability cannot be determined with substantial accuracy.
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