Distinguish between ‘provision’ and ‘reserve’

Explanation

Reserve


1.The portion of profit unbroken aside for unforeseen obligations of a business


2.made by debiting Profit and Loss appropriation account


3.It provides capital for running the business and safeguards against expenses from unforeseen contingencies


Provision


1.A portion of cash from the business put aside for meeting familiar liabilities or expenses


2.made by debiting Profit and Loss Account


3.secures business from expenses arising from known liabilities