Difference between provision and reserve

Question

Accepted Answer

Provision is a liability that is uncertain in timing or amount, while reserve is a portion of profits set aside for specific purposes.

Provision is a liability that is recognized in the financial statements when there is uncertainty about the timing or amount of an obligation.
Reserve is a portion of profits that is set aside by a company for specific purposes, such as future investments, contingencies, or dividends.
Provisions are made for known liabilities, such as bad debts, legal claims, or warranties.
Reserves are created to strengthen the financial position of a company or to meet future obligations.
Provisions are usually based on estimates and are adjusted over time as more information becomes available.
Reserves can be classified as general reserves, specific reserves, or capital reserves depending on their purpose.
Example of a provision: A company sets aside a provision for potential warranty claims on its products.
Example of a reserve: A company sets aside a reserve for future expansion projects.

Accepted Answer

Provison is the amount which is kept for bad debts

Reserve is nothing but transferring the amount which is left over after paying the equity or from the net income ..

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