Difference between provision and reserve

1.	Difference between provision and reserve
Answer» \tReserveProvisionThe portion of profit kept aside for unforeseen obligations of a businessA portion of money from the business set aside for meeting known liabilities or expensesCreated by debiting Profit and Loss appropriation accountCreated by debiting Profit and Loss AccountIt provides capital for running the business and safeguards against expenses from unforeseen contingenciesIt secures business from expenses arising from known liabilitiesPresence of profit is required for allocation of reserve.Presence of profit not necessary for allocationPaid from reservesCannot be paidReduces net profit of the organisationReduces profits for dividend distributionAlways shown on the liability sideAppears as a deduction from the concerned asset, in case of an asset, in case of liabilities, it is shown in the liabilities sideCan be used for any given purposeNeeds to be used for the specific purpose it is allocated for\t

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