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A provision is a charge against the profits of a Company (or a set-aside) while a reserve is a transfer of profits. You could also call reserve a book entry, or a below the line adjustment.
Provision is made irrespective of profits, for instance, a provision against Bad and Doubtful debts. A reserve is created out of, and only if there exists, profits.
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Difference between provision for bad debt and reserve for bad debt?
Provisions and Reserves are the amount setaside out of profits. When the amount is set aside for a particular purpose it is called a provison. Examples for this is Provision for Baddebts and provision for Depreciation and Provision for Discounts on Debtors. when the amount is setaside for particular purpose is called a provision whereas Reserve is the amount setaside out of profit but not for particular purpose. In most cases provision is incorrectly described as Reserve. One cannot create Reserve for baddebts.
What do you mean by reserve and Provision?
Reserve -The funds that a company sets aside to meet future unknown losses. Provision- the funds that a company set aside to meet future known losses
How are loan loss provision and loan loss reserve recorded?
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Difference between provision and reserve?
Provisions are charge against profit and Reserves are appropriation of profit.
Explain the provision to statutory reserve given is the banking regulation act?
15 percent of profit after tax.
Reserve for doubtful debts definition in accounting?
The reserve for bad debts is a provision set aside for debts (debtors) in the balance sheet that might not be collectable. This provision can be either specific or general: * Specific bad debt provision - a provision set aside for specific or identified individual debts considered not collectable. This provision is allowable for tax deduction * General bad debt provision - a provision set aside for non specific debts, it might be for eexample 100% of all debts over 90 days old and 50% of debts over 60 days old. It is a general provision to cover the fact if any of these debts go bad and is not an allowable deduction for tax purposes
What is the difference between Reserves and Provision?
Reserve is a an amount set aside from the profit when it is calculated. On the other hand provision is an amount charged against profit and loss in order to assist in calculating the accurate profit.
Is provision for taxation a current liabilities?
Basically it is a reserve however it should be carried as a liability on the books until paid then espense it however if the Co is for Sale You may show it as a reserve asset due to the fact that the full liability may never be incurred
What is development allowance reserve?
A development allowance reserve is a financial provision set aside by a company or organization to fund future development projects or initiatives. This reserve is typically allocated from profits or budget surpluses and is intended to cover costs related to research, innovation, or infrastructure improvements. By establishing such a reserve, entities can ensure they have the necessary resources to support growth and adapt to changing market demands.
What is a prepayment reserve?
A prepayment reserve is a financial provision set aside by lenders or investors to cover potential losses from borrowers who pay off their loans earlier than expected. This reserve helps to mitigate the impact of prepayment risk, as early repayments can reduce the expected cash flow and yield from loan portfolios. By maintaining this reserve, financial institutions can better manage their liquidity and maintain stability in their investment returns.
Difference between provision for reserve fund and reserve fund?
Provisions are those where the liability existence is certain, but the amount of liability cannot be determined with substantial accuracy. In case of reserves, the liability is not known. but some amount of profits are kept aside for meeting the contingencies that might become actual liabilities.
What is the difference between Loan Loss Reserves and Loan Loss Provisions?
loan loss reserve: loans are going to default so banks use part of provision to book reserve. loan loss provisions: percertage of gross loans that all banks have to keep in their balance sheet as regulated
