Difference Between Reserve and Provision

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

1. What are provisions and reserves explain?
2. What is difference between reserve and surplus?
3. What is the difference between provision for bad debts and reserve for bad debts?
4. What is meant by provision?
5. What is secret reserve?
6. What are the types of reserve?
7. What are the 3 types of reserves?
8. Is provision a reserve?
9. Is Depreciation a reserve or provision?
10. Is provision for bad debts an expense or income?
11. What is the entry of provision for bad debts?
12. What is provision for doubtful debts?

What are provisions and reserves explain?

The Provision means to keep some money for a known liability which is probable to arise after a certain time. The Reserve is to retain some money from the profit to for any particular future use. The amount of provision cannot be used to pay off dividends, but the amount of the reserves can be used for so.

What is difference between reserve and surplus?

Reserves are usually money earmarked by the company for specific purposes. The surplus is where all the profits of the company reside.

What is the difference between provision for bad debts and reserve for bad debts?

Difference between reserves and provisions is as follows Reserve is an appropriation of profit and provision is a charge on profits. ... But it says the value in excess of provision for bad debts is to be transferred to Reserve for bad debts.

What is meant by provision?

A provision is an amount set aside from a company's profits to cover an expected liability or a decrease in the value of an asset, even though the specific amount might be unknown. ... A provision is not a form of savings; instead, it is a recognition of an upcoming liability.

What is secret reserve?

A secret reserve is the amount by which the assets of an organization are understated or its liabilities are overstated. An entity might establish a secret reserve for competitive reasons, to hide from other businesses that it is in a better financial position than appears in its financial statements.

What are the types of reserve?

There are two main kinds of reserves: revenue reserves and capital reserves. They are taken from different sources of income and are usually set aside for different purposes.

What are the 3 types of reserves?

Reserves in accounting are of 3 types – revenue reserve, capital reserve and specific reserve.

Is provision a reserve?

A reserve is an appropriation of profits for a specific purpose. 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 purpose, while a provision is a charge for an estimated expense.

Is Depreciation a reserve or provision?

Provision for depreciation is an alternative term used for accumulated depreciation expenses. Depreciation expense is recognized on the income statement as a non-cash expense that reduces the company's net income. Explanation: Provision for bad debts is a liability for the business and is not any reserve.

Is provision for bad debts an expense or income?

If Provision for Doubtful Debts is the name of the account used for recording the current period's expense associated with the losses from normal credit sales, it will appear as an operating expense on the company's income statement. It may be included in the company's selling, general and administrative expenses.

What is the entry of provision for bad debts?

Record the journal entry by debiting bad debt expense and crediting allowance for doubtful accounts. When you decide to write off an account, debit allowance for doubtful accounts. The amount represents the value of accounts receivable that a company does not expect to receive payment for.

What is provision for doubtful debts?

The provision for doubtful debts is the estimated amount of bad debt that will arise from accounts receivable that have been issued but not yet collected. ... Thus, the net impact of the provision for doubtful debts is to accelerate the recognition of bad debts into earlier reporting periods.