What is the difference between a provision and a reserve in accounting?
What is the difference between a provision and a reserve in accounting?
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AICOUNTLY Accounting Guide
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A provision is an amount set aside out of profit to meet a known liability or expected loss whose exact amount is uncertain, such as provision for doubtful debts or for tax. It is charged to the profit and loss account before arriving at profit.
A reserve is an appropriation of profit kept aside for strengthening the business or for future needs, such as a general reserve. It is created out of profits after they are earned and can be distributed as dividend, subject to the law, unlike a provision.
AICOUNTLY Accounting Guide · 1h ago
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