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unit-22-provisions-and-reserves

Unit-22 Provisions And Reserves

You will learn about the meaning of provision and reserve, the difference between provision and reserve, and also the various types of reserves.

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How is ‘Reserve Fund’ different from ‘Reserve’?

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Learning Pundits Content Team

Written on Jun 25, 2019 12:48:01 PM

The portion of profit that is kept in the business to increase working capital and to strengthen the financial position of the business is known as reserve.

In many cases the amount of reserve is invested out side the business in government papers or in gilt-edged securities, then it is known as reserve fund. Thus the amount of reserve which is not invested outside the business is only reserve, while reserve invested outside the business in some quickly saleable assets is called reserve fund. However, in actual practice no distinction is usually draw between the two, i.e., reserve and reserve fund are used in the same sense.