Answers and Solutions

Answer

Provision is a charge against profit and debited to profit & loss a/c

Reserves is an appropriation against profit and is kept in the business and shown under different categories in the liabilities side and also debited to profi & loss appropriation a/c. It is created out of profit.

Answer

Provisions are a charge against profits. Ther are treated as expense and reduce the company's profits. It's an amount that you put in aside in your accounts to cover a probable but uncertain future liability. Such liability is known to arise in the future after a certain time. Example: Provision for depreciation, Provision for doubtful debtors. Provision has precise information about the exact amount of the expense or asset reduction.

Reserves are created after the company has made profits. Once all statutory payments are made such as taxes, the leftover profit is truly what is earned by the company. This amount can be set aside for any future needs that the company owners deem fit. Such appropriation of profit is not meant for liabilities or expenses that are KNOWN to arise in the future. This is done at the will of the board members. Instead, management simply makes note of its future cash needs, and budgets for them appropriately. The most common reserve is a capital reserve, where funds are set aside to purchase fixed assets.

In short, a reserve is an appropriation of profit for a specific or a general purpose, while a provision is a charge for an estimated expense.

Answer

Provision means advance preparation or collection of money for expected loss will occurred in future. Example

Provision For Doubtful debts

Provision For Depreciation and taxation

In against Reserve maintain for unexpected loss. 

Example uncertainty

Reserve like General reserve

Capital reserve

Building sold on loss

Answer

Provision is a part of profit and loss account, it is mandatory, reserve is an appropriation of profits i.e. it is removed out of profit after tax

Answer

Provision is a charge against profit but reserve is a creation out of profit.

Answer

Provision is a charge against profits, reserves is an appropriation of profit.