Distinguish between ‘provision&rsq | Class 11 Accountancy Chapter Depreciation, Provisions and Reserves, Depreciation, Provisions and Reserves NCERT Solutions

Question:

Distinguish between ‘provision’ and ‘reserve’ .

Answer:

Provision Reserve
  1. Provision refers to an amount that is kept aside from a company’s profit in order to cover probable expenses arising in future or a possible reduction in the value of an asset.
  2. Provisions are important for a business as they address certain expenses in business and payments made for them. Provisions should not be regarded as savings as these are created to meet expenses for an anticipated liability in future.
  3. It appears in the income statement in the form of expenses and is recorded as a current liability in the balance sheet.
  1. Reserve is the term which refers to a sum or percentage of profit that a company retains or keeps aside at the end of a financial year towards meeting future contingencies that may occur.
  2. It is also used to strengthen the business.
  3. Stabilises the financial position of a company by being used for expansion of assets, dividend payments and investments.


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  • Read the question carefully and focus on the core concept being asked.
  • Reference examples and data from the chapter when answering questions about Depreciation, Provisions and Reserves.
  • Review previous year question papers to get an idea of how such questions may be framed in exams.
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Welcome to the NCERT Solutions for Class 11 Accountancy - Chapter . This page offers a step-by-step solution to the specific question from Excercise 1 , Question 8: Distinguish between ‘provision’ and ‘reserve’ .....