Question

What is the meaning of reserve and provision?

Answer 1

• A reserve is an allotment of benefits for a particular reason. The most widely recognized reserve is a capital reserve, where assets are saved to buy fixed resources. By saving a reserve, the directorate is stratifying the assets from the overall operating utilization of the organization.

• A provision is the measure of a cost or decrease in the worth of a resource that a business chooses to perceive now in its accounting framework before it has exact data about the specific amount of the cost or resource decrease. For instance, a business regularly records provisions for debts, deals in allowances on sales, and stock obsolescence.

Also read:

• Difference Between Reserve and Provision
• Provision Examples