Difference between Reserve and provision
Difference between reserve and provision can be
explained as below;
1. Reserve
Reserve is created by
setting aside some amount for future specified purpose. The reserve is created
through appropriation of profit. Some examples of reserve are reserve for
purchase of asset, reserve for share issue etc.
2. Provision
Provision is charged to
current profit & loss account as result of an event which has occurred. For
example provision for warranty against sold items. Provision is future expense relates
to current period and therefore provision is recognized on the bases of best
estimate.
