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difference between provisions and reserves
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Answer Posted / naidu
Hello, everyone. Provisions and Reserves both imply setting
aside a stipulated amount to meet a situation, foreseen or
unforeseen.
However, although both of them serve the
same purpose, there is a big difference between both of
them being that RESERVE needn't necessarily be specific and
may be utilised towards meeting any obligation like issuing
bonus shares to shareholders or even forwriting off bad
debts
while,
PROVISION indicates an amount set aside for a
specific purpose like for covering bad debts, payment of
excess tax, if any, etc.
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