What Is The Difference Between Reserve And Allowance?



What Is The Difference Between Reserve And Allowance?..

Answer / Shubhi Pathak

Reserve and allowance are both funds set aside by a company, but they serve different purposes. A reserve is an amount of money that a company sets aside for future needs, such as a rainy day fund or a capital reserve. An allowance is an estimate of a liability or expense that has not yet been recorded, such as an estimated warranty cost or doubtful debt.

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