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प्रश्न
Distinguish between ‘provision’ and ‘reserve’
अंतर स्पष्ट करें
उत्तर
| Basis of Difference | Provision | Reserve |
| Meaning | It is created to meet the known liability. | It is created to meet unknown liability. |
| Nature | Provision is charged against profit. | Reserve is appropriation of the profit. |
| Purpose | It is created for a specific liability. | It is created for strengthening the financial position. |
| Mode of creation | It is created by debiting the profit and loss account. | It is created by debiting the profit and loss appropriation account. |
| Use for payment of dividend | It cannot be used for payment of dividends. | It can be used for payment of dividends. |
| Creation | Creation of provision is compulsory. It is created even if there is no profit. | Creation of reserve depends on the discretion of the management. It is created only when there is profit. |
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Reserves
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