Register now or log in to join your professional community.
provisions is fir potential or sure decress in asset value, reserve is avoiding part of profit to support the capital
Provision means you foresee certain receipts as bad debts
Reserves means you kept funds to avoid those uncertain receipts
A reserve is an appropriation of profits for a specific purpose. The most common reserve is a capital reserve, where funds are set aside to purchase Fixed assets.
A provision is the amount of an expense or reduction in the value of an asset that an entity recognizes in its accounting system, before it has precise information about the exact amount of the expense or reduction. For example, bad bebts
A Provision is refers to money written off to cover possible depreciation of assets and other liabilities. Such write-offs also cover the expected losses and contingencies of a company.
A reserve is profits that have been appropriated for a particular purpose. Reserves are sometimes set up to purchase fixed assets pay an expected legal settlement, pay bonuses, pay off dept, pay for repairs and maintenance, and so forth.
In short, a reserve is an appropriation of profit for a specific purpose, while a provision is a charge for an estimated expense.
