What is the difference between a provisions and reserves?

Answer

Provisions: provisions are made for meeting known liabilities..e.g.,provision for doubtful debts ,provision for depreciation e.t.c..
1. It is charged against profits .
2. provisions are compulsory ,whether there are profits or loss.
3. it cannot be used for distributing dividends.

 

PROVISIONS: These are made aganist charge. Provision are made if there is profit or not for company.ex: Bad debts, income tax.

RESERVES These are made on profits. Generally every has kept minium 10% as reserves.

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