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Reserves and provisions

saketh vaddadi (Student CA Articles) (49 Points)

01 June 2014

What is the difference between a provision and a reserve?

Example:Reserve for doubtful debts,Provision for doubtful debts.

Is there any specific difference?

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2 Replies

Ritu Chauhan (Student) (69 Points)
Replied 01 June 2014

Reserve is appropriation of Profit & loss while provision is charge to Profit & loss.

Tribhuvan Aditya Singh (Student as well as Self-employed) (3710 Points)
Replied 02 June 2014

reserve is actually a part of profit. the actual profit is divided into different reserves so that they can be used for specific purposes for which those reserve have been created. but provision is an expense that will be incurred in future. the liability of incurring expense is sure but the amount of expense is not sure, thats why provision is created.